CBA: CFPB’s NSF Proposal Seeks to Solve A Problem That Does Not Exist

March 25, 2024

In New Comment Letter, CBA Outlines Concerns With NSF Fee Proposal

WASHINGTON, D.C. – The Consumer Bankers Association (CBA) today submitted a new comment letter responding to a proposed rule seeking to prohibit Non-Sufficient Funds fees (NSF) on real-time payments that was released by the Consumer Financial Protection Bureau (CFPB) in January 2024. In the letter, CBA reiterated concerns regarding the aggressive development and future application of the CFPB’s abusiveness authority.

“The market failure the CFPB attempts to solve for does not exist. These regulatory efforts create costs – opportunity costs for both regulators and industry – and important compliance and operational risk-related costs.”

The NSF proposal relies on the CFPB's authority to prohibit unfair, deceptive, or abusive acts and practices (UDAAP) and deems NSF fees on declined real-time transactions to be an abusive, and therefore unlawful, practice. According to the CFPB’s own data, this proposal targets fees that are not generally charged to consumers by banks. The letter goes on to state:

 

“In light of the absence of market problem, CBA hopes that the Bureau will reevaluate the necessity of this rulemaking and withdraw this Proposal. However, in the event the Bureau decides to finalize this rule, we would appreciate the Bureau providing greater clarity on the operative terms of the regulation to clarify the limited scope of this rulemaking.

“Additionally, given this is a unique rule on abusiveness, we request the Bureau extend the effective date to 90 days so that our members may complete necessary systematic updates, especially given the unique UDAAP nature of this rulemaking.”

In the letter, CBA outlines the following concerns with the Bureau’s proposal:

  • It is a solution in search of a problem as it seeks to solve a market problem that does not exist;
  • It needs to clarify operative aspects of the proposal given the advancement in payments technology; and
  • It repeats flawed characterizations of CFPB’s interpretation of abusiveness.

To read the full letter, click HERE.

Background

This NSF proposal is part of the CFPB’s continued effort to curb so-called "junk fees." This proposal is a follow-on to an earlier proposal to treat overdraft services as credit subject to TILA and Regulation Z for very large financial institutions. This proposal comes after the CFPB’s recent final rule to limiting the safe harbor amount credit card issuers can charge consumers for late payments.

CBA Advocacy

  • To read CBA’s statement on the NSF proposal when it was first proposed, click HERE.
  • To read CBA’s Facts Matter blog about how the CFPB misrepresented bank fees in its press release on its NSF proposal, click HERE.