The American Bankers Association today joined the Mississippi Bankers Association and associations representing bankers and credit unions in filing a lawsuit challenging the Consumer Financial Protection Bureau’s effective cap on overdraft fees. The lawsuit was filed in U.S. District Court for Southern Mississippi.
The CFPB earlier today issued a final rule limiting banks with at least $10 billion in assets from charging overdraft fees of more than $5 unless they voluntarily set a cap that covers their actual costs and losses, or treats overdraft protection as a loan covered by the Truth in Lending Act, or TILA. In their lawsuit, the associations argue that overdraft fees can’t be regulated under TILA as they are not credit products, and that CFPB acted arbitrarily and capriciously by failing to consider the costs and benefits of the rule.
“Over the years, financial institutions have innovated to offer a wide variety of features for overdraft services at a range of price points, and consumers can choose the financial institution and the type of account that best suits their needs,” the plaintiffs said. The CFPB rule, “which makes it costlier and more difficult for a financial institution to provide overdraft services, will harm the very consumers the CFPB purports to benefit,” they added.
The associations asked the court to find the final rule violates TILA and other federal statutes and overturn it.
In a statement, ABA President and CEO Rob Nichols said it was unfortunate that ABA had to turn to the courts once again “to rein in a CFPB director unwilling to recognize the clear legal boundaries set by Congress.”
“The CFPB’s final overdraft rule exceeds the bureau’s statutory authority, ignores thoughtful industry and stakeholder feedback, and will harm the very consumers the CFPB claims to protect,” Nichols said. “Surveys consistently show that Americans understand and appreciate overdraft protection, and if this rule is allowed to move forward, many Americans will lose this service. Consumers don’t want that to happen, which is why we have joined this litigation. We look forward to the court’s review.”
“Overdraft protections meet the clear and definite market-based need for a safe, responsible, and easily understandable source of consumer liquidity,” Mississippi Bankers Association President and CEO Gordon Fellows said. “Overdraft services provide consumers with essential liquidity that can be the difference between putting food on the table or putting it back on the grocery store shelf. The CFPB’s new rule is a clear overreach of the bureau’s authority, and if allowed to stand it will result in Mississippians losing access to the liquidity that overdraft services provide.”
