CFPB issues guidance on fees for overdraft protection, depositors

The Consumer Financial Protection Bureau today issued guidance on certain overdraft and depositor bank fees that the agency alleged “are likely unfair and unlawful.” The guidance was released as part of a larger announcement by the Biden administration that it was directing agencies to take action against “junk fees” and “surprise billing” across a number of industries, including banking, cable and internet bills, and airline and concert tickets.

The CFPB stated that a financial institution may engage in an unlawful practice when it authorizes a transaction on sufficient funds in the customer’s account but charges an overdraft fee when the transaction posts against insufficient funds in the account (“authorized positive, settled negative,” or APSN, transactions).

In terms of depositor fees, financial institutions “can generally stay on the right side of the law when they employ more tailored fee policies that charge depositor fees only in situations where a depositor could have avoided the fee, such as when a depositor repeatedly deposits bad checks from the same originator,” the CFPB said.

ABA President and CEO Rob Nichols criticized the CFPB’s “attempts to sensationalize highly regulated fees that are already clearly disclosed to customers” under existing federal rules.

“Reg DD requires banks to disclose fees charged to recipients of checks that bounce,” Nichols said. “Financial institutions that charge those fees use them to cover the cost associated with identifying and returning a bad check and the risk of loss if the money is no longer in the account when the check is returned.”

Turning to the CFPB’s guidance on APSN transactions, Nichols said that the “so-called ‘surprise’ overdraft fees identified by the bureau are also disclosed under existing rules and are largely triggered by operational issues that have been addressed by technology improvements made by banks and their vendors as far back as three years ago.”