The Consumer Financial Protection Bureau is withdrawing a proposed rule to prevent financial institutions from charging nonsufficient funds fees for transactions that are instantaneously declined, according to an advanced notice in the Federal Register. The bureau will instead consider a “more comprehensive approach” that may involve restricting other NSF fees.
The CFPB proposed last year proposed banning NSF and other fees for ATM withdrawals, debit card purchases, peer-to-peer payments or other transactions that are declined “instantaneously or near-instantaneously.” The bureau alleged the fees represent an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive or abusive acts or practices. However, it also acknowledged that NSF fees are rarely charged on instantaneous transactions and that the rule was meant to prevent the practice from becoming more common.
The proposed rule was part of a broader push by the Biden administration to restrict so-called “junk fees” charged by various industries. It is unclear whether President-elect Trump will prioritize the issue.
The American Bankers Association was among the many critics of the proposal and urged the CFPB to withdraw the rule. The CFPB “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,” ABA President and CEO Rob Nichols said when the proposal was first announced. “As an independent regulator, the bureau should leave politics to the campaign trail.”
The CFPB said it received nearly 8,000 comments in response to the proposed rule. Based on comments in favor of the proposal, the bureau concluded that “practices involving the charging of NSF fees on other types of transactions may also be abusive for reasons similar to those discussed in the proposal.” Since those were outside the original scope of the proposed rule, it decided to withdraw the rule and “consider whether consumers similarly lack understanding of other NSF fees to determine whether a broader rulemaking would be appropriate.”
