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Key Takeaways
- The Consumer Financial Protection Bureau proposed a ban on a kind of fee that banks almost never charge.
- The bureau says banks shouldn’t be allowed to charge a non-sufficient funds fee when an instant payment is declined because there’s not enough money in the customer’s account.
- The CFPB has also proposed limiting overdraft fees and credit card late fees, among other efforts to curb what it calls ‘junk fees.’
Have you ever been charged a fee when your debit card was instantly declined for not having a sufficient balance? Probably not, and government banking regulators want to keep it that way.
In its latest move in its campaign against what the Biden administration calls ‘junk fees,’ the Consumer Financial Protection Bureau proposed a rule Wednesday banning banks from charging non-sufficient fund fees on transactions with debit cards, peer-to-peer payments, and other transactions that are instantly processed. For example, charging a fee when a customer attempts to pay $100 for groceries, but the transaction doesn’t go through because they only have $90 in their account.
While banks “almost never” charge such fees according to the CFPB, instead usually charging NSF fees on checks and automatic payments, which can take longer to process, the bureau said it wanted to prevent banks from doing so in the future.
“The CFPB will continue to rid the market of junk fees today and prevent new junk fees from emerging in the future,” bureau director Rohit Chopra said in a prepared statement.
The bureau said such fees, should they be charged, “would constitute an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices.”
The proposal comes on the heels of the bureau’s proposal this month to put a limit as low as $3 on overdraft fees. (Overdraft fees are similar to NSF fees, except in an overdraft, the bank allows the transaction to go through instead of blocking it, leaving the customer with a negative balance.) Last year, the bureau proposed an $8 limit on credit card late fees, a rule that is expected to kick in early in 2024.
Instant payments have become more common as consumers have ditched cash and paper checks for mobile apps and fintech services such as Venmo and PayPal. That trend is likely to continue: Earlier this year, the Federal Reserve launched FedNow, a network that enables banks and credit unions to process instant payments.