The Consumer Financial Protection Bureau (CFPB) has proposed a new rule aimed at curbing the imposition of NSF fees on real-time declined transactions.
This initiative is part of a broader strategy by the CFPB to combat junk fees and ensure a fairer banking environment for consumers.
CFPB Director Rohit Chopra highlighted the issue, stating, “Over the years, large banks and their consultants have concocted new junk fees for fake services that cost almost nothing to deliver.” He emphasised that the primary goal should be to foster competition among banks to offer superior products at lower costs, rather than creating new avenues for unjustified fees.
The proposed rule targets a specific area of banking fees – those charged for transactions declined at the point of interaction, such as swipes, taps, or clicks, due to insufficient funds. Currently, financial institutions rarely impose fees for these real-time declined transactions. However, the CFPB is taking pre-emptive action to prevent this from becoming a common practice as technology evolves and the ability of financial institutions to decline transactions instantly increases.
The CFPB’s proposed rule would classify the imposition of fees for real-time declined transactions as unlawful under the Consumer Financial Protection Act. This move is a part of the CFPB’s ongoing efforts to eliminate unfair NSF and other junk fees. Director Chopra stated, “Banks should be competing to provide better products at lower costs, not innovating to impose extra fees for no value.”
In addition to proposing this new rule, the CFPB has been actively working to reduce the burden of junk fees on consumers. Its initiatives have led to significant changes in the banking industry, with many institutions reducing or eliminating NSF fees. These reforms are projected to save consumers approximately $2bn annually. Moreover, the CFPB has been proactive in taking direct action against unlawful fee practices. For instance, in 2023, Bank of America was ordered to pay over $100m for, among other infractions, the improper imposition of NSF fees.
The CFPB’s comprehensive approach, including proposing new rules and taking enforcement action against unfair practices, demonstrates its commitment to ensuring consumer protection in the financial sector and fostering a more transparent and fair banking environment.
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