Facts Matter: In NSF Fee Press Release, CFPB Misrepresents Bank Advancements that Save Consumers Billions

WASHINGTON, D.C. – Last week, the Consumer Financial Protection Bureau (CFPB) released a proposal that would prohibit certain types of non-sufficient funds (NSF) fees, citing them as “junk fees” in its press release. In particular, the proposed rule would only prohibit NSF fees on transactions that are declined in real time at the “swipe, tap, or click” – explicitly not covering check and ACH transactions. The CFPB’s press release includes quotes that would make a fast reader think that NSF fees are rapidly evolving and growing. (“Over the years, large banks and their consultants have concocted new junk fees for fake services that cost almost nothing to deliver.”) In reality, these fees are rarely charged to consumers. In fact, the CFPB’s press release regarding the proposal leaves out critical data about the work banks have done to reduce or eliminate NSF fees altogether. In this installment of Facts Matter, we dive into the numbers on NSF fees and once again emphasize that “facts matter” when policymakers create new regulations.

A Rule Without A Role

In what may be a first for the CFPB, it decided to propose a rule where a problem does not actually exist. CFPB Director Rohit Chopra says that “banks should be competing to provide better products at lower costs, not innovating to impose extra fees for no value.” But, it’s not clear who, if anyone, has imposed these extra new fees. Despite the CFPB’s headline-grabbing quotes about “new junk fees” created by large bank consultants over the years, its own data shows that banks almost never charge fees for transactions that are declined in real time.

Banks Have Overwhelmingly Eliminated NSF Fees

Further, in October 2023, the CFPB itself released a data spotlight on NSF fees overall. The CFPB highlighted that banks have eliminated the vast majority of NSF fees and estimated that consumers save almost $2 billion annually. In its report, the CFPB highlights nearly two-thirds of banks with over $10 billion in assets have eliminated NSF fees – “representing an estimated 97 percent of annual NSF fee revenue earned by those institutions” – while the majority of banks which earned the most from NSF fee revenue have eliminated these fees entirely. Additionally, none of the largest banks (those with over $75 billion in assets) charge these fees. The CFPB even notes that this is due to “changes in bank policies,” as opposed to the result of regulation.

Conclusion

The CFPB appears to be proposing a regulation that its own research shows to be unnecessary. These regulatory efforts create costs – opportunity costs for both regulators and industry – and important compliance and operational risk-related costs. It isn’t clear what, if any, consumer benefit would offset these costs. CBA looks forward to working constructively with the CFPB, as with all of our regulators, beyond what appears to be its recent clamoring for headlines, to advance commonsense policies that protect consumers from problems that they are actually facing as they try to make ends meet