Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed rule with request for public comment to prohibit covered financial institutions from charging nonsufficient funds fees (NSF) for payment transactions that are instantaneously declined. The proposed rule would treat fees for transactions declined in real time to be unlawful under the Consumer Financial Protection Act.

By itself, the proposed rule will have limited impact since, as the Bureau states in its press release announcing the proposed rule, financial institutions rarely charge fees for transactions declined in real time. Thus, the proposal is likely to have significantly less impact than last week’s proposal, discussed here, to amend exemptions to Regulation Z so the Truth in Lending Act (TILA)/Regulation Z would apply to certain overdraft “credit.” Under last week’s proposal, an institution subject to the rule would have to provide full TILA disclosures and comply with other substantive TILA requirements for overdraft fees if they exceed costs or a low CFPB safe harbor amount.

The CFPB’s new proposed rulemaking continues its crusade against so-called “junk fees,” including the Bureau’s December report highlighting consumer experiences with overdraft and NSF fees, discussed here.

Interested parties have until March 25, 2024 to submit comments. The CFPB proposes the rule take effect 30 days after the final rule is published in the Federal Register.

Photo of Jason Cover Jason Cover

Jason’s in-depth experience advising on consumer lending matters both as in-house counsel and outside advisor provides extensive industry knowledge for his financial services clients.

Photo of Mark Furletti Mark Furletti

Mark helps clients navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small business, particularly in connection with credit, deposit, and payments products. He is a trusted advisor, providing practical legal counsel and advice to providers of financial

Mark helps clients navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small business, particularly in connection with credit, deposit, and payments products. He is a trusted advisor, providing practical legal counsel and advice to providers of financial services across numerous industries.

Photo of Taylor Gess Taylor Gess

Taylor focuses her practice on providing regulatory advice on matters related to federal and state consumer protection, consumer finance, and payments laws, including those that apply to payment cards, lines of credit, installment loans, electronic payments, online banking, buy-now-pay-later transactions, retail installment contracts…

Taylor focuses her practice on providing regulatory advice on matters related to federal and state consumer protection, consumer finance, and payments laws, including those that apply to payment cards, lines of credit, installment loans, electronic payments, online banking, buy-now-pay-later transactions, retail installment contracts, rental-purchase transactions, and small business loans.

Photo of Stefanie Jackman Stefanie Jackman

Stefanie takes a holistic approach to working with clients both through compliance counseling and assessment relating to consumer products and services, as well as serving as a zealous advocate in government inquiries, investigations, and consumer litigation.

Photo of James Kim James Kim

As a former senior enforcement attorney with the CFPB, James provides the industry knowledge and expertise that fintechs and financial institutions require when launching new products or facing regulatory scrutiny.

Photo of Josh McBeain Josh McBeain

Josh focuses his practice on federal and state consumer and business lending and payments laws, including those that apply to credit cards, installment loans, lines of credit, and point-of-sale finance.

Photo of Glen Trudel Glen Trudel

A former bank in-house counsel, Glen brings real-world experience to financial institutions, marketplace lenders, fintechs, and other companies grappling with both regulatory and transactional issues.