CFPB regulatory control over consumer bank charges


The Consumer Financial Protection Bureau (“CFPB”) has strengthened its regulatory control of fees that financial institutions impose on consumer depositors. In order to better understand the range of these fees and the practices of financial institutions towards them, the CFPB has asked financial institutions to submit detailed quarterly statements identifying and breaking down the different types of fees assessed on consumer accounts. In particular, the CFPB asked them to provide aggregate amounts billed such as (i) overdraft and insufficient funds (“NSF”) charges; (ii) periodic account maintenance fees; and (iii) ATM fees (in particular, fees charged for consumer transactions at off-network ATMs). The CFPB has now analyzed data on consumption costs dating back to 2015 and published two reports: (i) Data point: Overdraft / NSF fees exceeded since 2015 – Evidence from bank call reports; and (ii) Data point: verification of account overdrafts at financial institutions served by main processors. In general, reports reveal that overdraft and NSF fees are one of the main sources of financial institution revenue generated by consumer banking transactions. Indeed, overdraft fees alone generated more than $ 15 billion in revenue for banks and credit unions in 2019.

CFPB critical Significant and persistent “dependence” of financial institutions on overdrafts and revenue from NSF charges during the relevant period. In particular, the CFPB “will strengthen its supervision of banks which depend heavily on overdraft fees”. The CFPB has also indicated its willingness to “take action against large financial institutions whose overdraft practices violate the law” and will focus primarily on scrutinizing financial institutions that are particularly dependent on overdraft fees and NSF. The CFPB was particularly concerned about NSF’s allegedly impenetrable overdraft policies that could leave consumers in the dark about exactly when charges might be incurred.

The CFPB’s focus on NSF overdrafts and fees goes hand in hand with an active and creative litigation bar that has carefully reviewed consumer banking practices and account disclosures with the goal of pursuing lucrative class action lawsuits. Financial institutions have been hit by a wave of class actions alleging, for example, that they do not sufficiently disclose that consumers can be affected by non-payment or overdraft charges when items are resubmitted for payment, after being initially rejected, and the consumer has insufficient free balance to cover the debit at the time of re-presentation. The Complainants’ Bar also criticized allegedly insufficient disclosures about so-called ‘allow positive, settle negative’ overdraft fees that can, when a consumer ‘authorizes’ a debit card transaction with a sufficient available balance, but due to intermediate debits, the transaction “rule” (that is to say the merchant is paid) when the balance is insufficient.

CFPB reports should provide the necessary impetus for any financial institution that charges non-payment or overdraft fees to review its practices to ensure compliance with the law. In addition, financial institutions should review their consumer account information to verify that this information fully, fairly and accurately discloses when and under what circumstances a customer may incur overdraft fees and / or NSF charges in the process. framework of consumer banking transactions.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume XI, number 340


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