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In a recent rulemaking agenda filed by the CFPB, the Bureau signaled it expects to issue new proposed rules concerning non-sufficient funds (NSF) fees and overdraft fees. The filing caught the attention of credit union and banking groups and they called on the CFPB to follow proper rulemaking procedures if the Bureau heads down this road.
On Wednesday, officials from America's Credit Unions, the American Bankers Association and the Independent Community Bankers of America sent a joint letter to CFPB Director Rohit Chopra stating any such NSF fees and overdraft fees rules would cause a negative economic impact on financial institutions and the Bureau must go through the Small Business Regulatory Enforcement Fairness Act (SBREFA) review process.
"These rulemakings will have a significant economic impact on banks and credit unions with assets of $850 million or less, which triggers the SBREFA review process," the letter stated. "We urge you not to proceed with these rulemakings until the Bureau assesses the economic impact of its rulemakings on community banks and credit unions, as the Bureau is required to do under section 1100G of the Dodd-Frank Wall Street Reform and Consumer Protection Act."
According to a brief description in the filing by the CFPB, the Bureau appears to argue it's been too long since NSF fees and overdraft fees rules have been updated.
"Financial institutions offer various types of overdraft services, some of which are subject to Regulation Z and some of which are not," the filing stated. "Whether Regulation Z applies depends on whether fees imposed in connection with those services (overdraft fees) are considered finance charges. When the Federal Reserve Board first adopted Regulation Z in 1969, it created special rules for determining whether overdraft fees are considered finance charges. While the nature of overdraft services, including how accounts can be overdrawn and how financial institutions determine whether to advance funds to pay the overdrawn amount, has significantly changed since 1969, the special rules remain largely unchanged."
The filing concluded, "The CFPB is considering developing proposed amendments to Regulation Z with respect to these special rules."
In the letter, the credit union and banking groups argued, "If the Bureau intends to use its authority to regulate unfair, deceptive or abusive acts and practices to prohibit charging NSF fees under certain circumstances, that prohibition will apply to all banks and credit unions, regardless of asset size."
The groups also argued, adding any similar rule subjecting overdraft fees to Regulation Z would also impact all overdraft services at financial institutions.
According to the CFPB's filing, there is no timeline for publishing the proposed rules.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
