On January 24, 2024, the CFPB proposed a new rule to block banks and other financial institutions from one potential source of new junk fee revenue. The proposed rule would prohibit non-sufficient funds (NSF) fees on transactions that financial institutions decline in real time such as declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer payments.
According to the CFPB, financial institutions almost never charge fees for transactions that are declined in real time at the swipe, tap, or click. However, as technology advances, financial institutions may be able to decline more transactions right at the swipe, tap, or click. These transactions include ATM, debit or prepaid card, online transfer, in-person bank teller, and certain person-to-person transactions. Thus, the CFPB is taking proactive steps to ensure that financial institutions do not impose these fees.
The CFPB’s proposed rule would consider fees for transactions declined in real time to be unlawful where charging such fees would constitute an abusive practice under the Consumer Financial Protection Act. The prohibition would cover transactions involving the use of debit cards, ATMs, or certain person-to-person apps. The proposed rule would cover financial institutions of any size and depositories as well as non-depositories.
Read the CFPB’s press release here.
The proposed rule can be found here.