The American Bankers Association today urged the Consumer Financial Protection Bureau to withdraw a proposed rule to prohibit certain insufficient funds fees as “abusive,” saying the bureau is attempting to regulate a largely hypothetical situation while advancing an aggressive reading of its authority to prohibit abusive acts or practices.
The CFPB in January proposed to prohibit financial institutions from charging insufficient funds fees for one-time debit card, ATM transactions and some person-to-person payments that are declined instantly or near-instantly. The bureau acknowledged that such fees are rarely charged. However, the bureau nonetheless concluded that the fees take unreasonable advantage of consumers’ lack of awareness of the risks, costs or conditions of a consumer financial product or service.
In a comment letter, ABA noted that CFPB’s Truth in Savings Act rule already requires financial institutions to disclosure fees at account opening. It also noted that banks have devoted considerable resources to developing mobile and online banking, low balance alerts and numerous other tools to promote consumer access and control of their finances. Given the availability of such tools, financial institutions are not taking unreasonable advantage of consumers, as the bureau alleges, ABA said. In addition, the CFPB wrongly concluded that disclosure is not a remedy because some consumers won’t understand even the clearest disclosure, the association said.
“The bureau’s proposed approach is contrary to decades of federal policy on consumer protection and the consumer financial laws the bureau implements, which rely primarily on disclosure to give consumers choice and promote competition,” ABA said.
