CFPB proposes banning NSF fees for instantaneous transactions

The Consumer Financial Protection Bureau today proposed what it characterized as a “proactive step” to prevent banks and other financial institutions from charging fees for transactions that are instantaneously declined. The proposed rule would prevent financial institutions from charging nonsufficient funds fees or other fees for ATM withdrawals, debit card purchases, peer-to-peer payments or other transactions that are declined “instantaneously or near-instantaneously.” The agency claimed that charging the fees represent an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive or abusive acts or practices.

The CFPB acknowledged in the proposal that NSF fees are rarely charged on transactions that currently take place instantaneously. It instead argued that the ban is meant to prevent the practice from becoming more widespread in the future. “As technological advancements may eventually make instantaneous payments ubiquitous, the CFPB believes that is important to proactively set regulations to protect consumers from abusive practices,” the agency said. The CFPB has set a March 25 deadline for public comment on the proposed rule.

In a statement, ABA President and CEO Rob Nichols questioned the reasoning behind the proposal. “Today’s CFPB press release conjures up a bank fee that the bureau itself concedes few—if any—banks charge and proposes a rule to prevent banks from charging this mysterious fee in the future,” he said. “As an independent regulator, the bureau should leave politics to the campaign trail.”

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