In a new report published last week titled “Banks’ overdraft/NSF fee revenue declines significantly compared to pre-pandemic levels,” the CFPB reported that its most recent analysis found that bank overdraft/NSF fee revenue was 43% lower in the third quarter of 2022 than in the third quarter of 2019 before the COVID-19 pandemic onset – suggesting $5.1 billion less in fees on an annualized basis.  The CFPB noted that both large and small/midsize banks saw a reduction in overdraft/NSF revenues through the first three quarters of 2022 compared to those of 2019.

The CFPB also found that overdraft/NSF fee revenue was 33% lower over the first three quarters of 2022 compared to the same period in 2019, and has trended downward in each quarter since the fourth quarter of 2021.  The CFPB indicated that it has not observed correlating increases in other listed checking account fees, which suggests that banks are not replacing overdraft/NSF fee revenue with other fees on checking accounts.

Ironically, the CFPB published its report the day after President Biden’s State of the Union address in which the President announced that his administration “is also taking on ‘junk’ fees, those hidden surcharges too many businesses use to make you pay more” and took credit for “reduc[ing] exorbitant bank overdraft fees.”  In characterizing overdraft and NSF fees as “junk fees,” the President adopted the CFPB’s tactic of mischaracterizing a wide range of fees charged by financial institutions as “junk fees.”  For example, when the CFPB issued its “Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services,” it described the RFI as “an initiative to save households billions of dollars a year by reducing exploitative junk fees charged by banks and financial companies.”

Despite changes in bank overdraft and NSF fee practices and declining revenues, the CFPB announced in its Fall 2022 rulemaking agenda that it is considering whether to propose amendments to the Regulation Z overdraft rules and new rules on NSF fees.  Although the CFPB has continued to make overdraft and NSF fees a supervisory focus under Director Chopra and he has warned of potential UDAAP violations arising from such fees, the CFPB had previously been silent on whether it planned to engage in rulemaking on overdraft or NSF fees. 

The significant decline in overdraft and NSF fee revenues shown in the data reported in the CFPB’s new report serves as powerful new evidence of wide-spread changes in overdraft and NSF fee practices in the banking industry.  Indeed, the CFPB expressly acknowledges in the report that the decline in revenues is “likely due to changes in bank policies.”  This clearly calls into question the need for new regulations on overdraft or NSF fees.  However, because the Biden Administration has now made “junk fees” an overtly political issue, the CFPB could face significant pressure from the White House to engage in rulemaking.