The CFPB may not proceed with rulemakings on overdraft and NSF fees until it assesses the economic effects of the rulemakings on community banks and credit unions, as it is required to do under the Dodd-Frank Act, the American Bankers Association asserted in a joint letter with the Independent Community Bankers of America and America’s Credit Unions this week.
Under the Small Business Regulatory Enforcement Fairness Act, as amended by the Dodd-Frank Act, the CFPB must consider the effects on small businesses before it initiates a rulemaking that will have a “significant economic impact on a substantial number of small entities.” In its fall 2023 rulemaking agenda, the CFPB stated that it will soon issue proposals to regulate the charging of NSF fees using the CFPB’s authority to prevent unfair, deceptive or abusive practices, and to define overdraft fees as credit subject to the Truth in Lending Act and Regulation Z. The CFPB, however, has not initiated a SBREFA review for either rulemaking, signaling that it intends to skip this critical step in the rulemaking process.
ABA observed that, if the CFPB prohibits charging NSF fees under certain circumstances, the prohibition will apply to all banks and credit unions, regardless of asset size. If the CFPB writes a rule that subjects overdraft fees to Reg. Z, that regulation would affect overdraft protection services offered by all banks and credit unions because they would face market pressure to conform their practices to the CFPB’s rule.
Any rule issued by the bureau on overdraft or NSF fees will have “a significant impact on a substantial number of institutions with assets of $850 million or less,” ABA said, emphasizing that Congress “clearly directed” the bureau to initiate a SBREFA review before issuing notices of proposed rulemakings.