The OCC has issued a new bulletin and the FDIC has issued new supervisory guidance directed to their supervised institutions to address “authorize positive, settle negative” (APSN) overdraft fee practices. The OCC bulletin also addresses non-sufficient funds (NSF) fee practices. Based on the bulletin and guidance, it would appear that the OCC and FDIC share the CFPB’s apparent view that APSN fees are unfair regardless of how clearly and conspicuously they are disclosed to consumers. … Continue Reading
Overdrafts
CFPB report of decline in bank revenues from overdraft and NSF fees follows President Biden’s targeting of “junk fees” State of the Union address
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. … Continue Reading
New York Governor’s 2024 fiscal budget proposal targets overdraft and NSF fees
On February 2, 2023, New York Governor Kathy Hochul released her 2024 fiscal budget proposal, which included banking policy to “Protect New Yorkers from Predatory Banking Fee” in the Executive Budget Briefing Book. The Briefing Book states:
“The Executive Budget includes nation-leading legislation that comprehensively addresses abusive bank fee practices, which tend to disproportionally harm low- and moderate-income New Yorkers, including stopping the opportunistic sequencing of transactions in a way designed to maximize fees charged to consumers, ending other unfair overdraft and non-sufficient funds fee practices, and ensuring clear disclosures and alerts of any permissible bank processing charges.”… Continue Reading
7th Circuit Affirms District Courts’ Dismissal of NSF Class Action
On October 25, the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s order dismissing a class action alleging that an Illinois internet-based credit union breached its account agreement when it charged non-sufficient funds (NSF) fees to its customers. Plaintiff alleged the account agreement required the credit union to use the ledger-balance to assess NSF fees and only assess one NSF fee per transaction.… Continue Reading
More CFPB attacks on bank fees through policy statements
On October 26, 2022, President Biden appeared at the White House with Rohit Chopra, CFPB Director, and Lina Khan, FTC Chair, to announce that his Administration is taking action to eliminate all “junk fees,” such as fees for deposited checks that are returned unpaid, surprise banking overdraft fees, hidden hotel booking fees and termination charges to stop people from changing cable plans. … Continue Reading
New York federal district court allows class action challenging bank’s NSF fees to proceed on breach of contract theory
A New York federal district court has issued an order allowing a putative class action to proceed against Trustco Bank, finding that the plaintiff had stated a claim for breach of contract based on the bank’s assessment of non-sufficient funds (NSF) fees. The complaint in Jenkins v. Trustco Bank alleges that Trustco’s assessment of multiple NSF fees on the same transaction constituted 1) a breach of the covenant of good faith and fair dealing, 2) unjust enrichment, 3) a deceptive act or practice under New York General Business Law § 349, and 4) a breach of contract. … Continue Reading
Curinos publishes update to “Competition Drives Overdraft Disruption” study, predicting consumer savings of $28B from 2021 to 2025
On September 6, 2022, Curinos published an update to their “Competition Drives Overdraft Disruption” study published in December 2021. Curinos was formed from the combination of two data driven business intelligence companies, Novantas and Informa’s FBX business.
As has been previously reported by the CFPB through a blog post and two December 2021 overdraft reports, which we previously blogged about here and here, many banks have announced innovations and policy changes in the past year to enhance their overdraft programs and reduce consumer harm.… Continue Reading
House Financial Services Committee passes the Overdraft Protection Act
On July 28, the U.S. House Committee on Financial Services passed H.R. 4277, the Overdraft Protection Act. Introduced by Congresswoman Carolyn B. Maloney (D-NY), the bill would prohibit financial institutions from engaging in unfair or deceptive acts or practices in connection with overdraft coverage.
Specifically, the bill would require financial institutions that offer overdraft coverage for accounts to disclose: (i) the specific amount of overdraft coverage fees; (ii) that the consumer’s transaction may be declined if there are insufficient funds in the account; and (iii) that the consumer will not be charged a fee if the transaction is declined. … Continue Reading
Delaware federal district court holds use of overdraft notice template did not shield credit union from Regulation E or state law liability
A Delaware federal court has refused to dismiss a class action complaint filed against a credit union that alleges the credit union violated Regulation E and the Delaware Consumer Fraud Act (CFA) even though the credit union’s overdraft opt-in notice tracked the language in the Regulation E model notice. The decision should serve as a reminder to financial institutions of the need to make sure their opt-in notices accurately and fully describe their overdraft policies. … Continue Reading
CFPB provides data on overdraft/NSF fee revenues; NY enacts law requiring DFS to study overdraft fees
Overdraft and NSF fees remain very much on the radar of the CFPB, the federal banking agencies, and certain state banking agencies. The very fact that the CFPB continues to closely monitor bank call reports with respect to overdraft and NSF fee revenues demonstrates the Bureau’s ongoing focus on this issue. … Continue Reading