On April 16, 2024, the U.S. District Court Judge Gershwin A. Drain in the Eastern District of Michigan granted summary judgment in favor of Flagstar Bank (the “Bank”) in a case where the plaintiff alleged breach of contract and conversion with respect to the Bank’s overdraft (OD) and non-sufficient funds (NSF) fee practices. … Continue Reading
This week’s podcast episode: A close look at the Consumer Financial Protection Bureau’s proposed rules on overdraft and nonsufficient funds fees
By Barbara S. Mishkin on
Our special guest is David Pommerehn, SVP, General Counsel, Head of Regulatory Affairs at the Consumer Bankers Association. In January 2024, the CFPB proposed two new rules: one restricting overdraft fees and the other prohibiting NSF fees on certain declined transactions. The proposals are among the CFPB’s latest moves in furtherance of the Biden Administration’s “junk fees” agenda. … Continue Reading
Minnesota federal court dismisses lawsuit against FDIC over NSF fee guidance
By Kristen E. Larson on
On April 8, 2024, a Minnesota federal district court dismissed without prejudice the complaint filed by the Minnesota Bankers Association and Lake Central Bank (Plaintiffs) against the Federal Deposit Insurance Corporation (FDIC) challenging the FDIC’s guidance on non-sufficient funds (NSF) fees.
Plaintiffs filed their complaint in July 2023 seeking declaratory and injunctive relief under the Administrative Procedures Act (APA) against defendants FDIC and Chairman Martin J.… Continue Reading
Atlantic Union Bank to pay $6.2M for its unlawful overdraft opt-in practices
On December 7, 2023, Atlantic Union Bank (the “Bank”) entered into a consent order with the Consumer Financial Protections Bureau (CFPB) related to its in-person and telephone overdraft opt-in sales practices during 2017-2020. The settlement requires the Bank to refund affected consumers $5 million in overdraft fees and pay a $1.2 million civil money penalty to the CFPB.… Continue Reading
Minnesota Bankers Association and Lake Central Bank sue FDIC over NSF fee guidance
By Kristen E. Larson on
Posted in FDIC, Litigation and Court Decisions
A complaint filed on July 20, 2023 in Minnesota federal court seeks declaratory and injunctive relief under the Administrative Procedures Act (APA) against defendants Federal Deposit Insurance Corporation (FDIC) and Chairman Martin J. Gruenberg for the FDIC’s issuance of supervisory guidance to banks under its supervision (i.e., state-chartered banks that are not members of the Federal Reserve System) prohibiting them from charging multiple non-sufficient funds (NSF) fees for the same item.… Continue Reading
CFPB report shows nearly 50% decline in overdraft/NSF fee revenues from pre-pandemic levels
The CFPB has issued a data spotlight that shows bank overdraft/non-sufficient funds (NSF) fee revenues have declined significantly from their pre-pandemic levels.
The report states:
Overdraft/NSF revenue for the fourth quarter of 2022 alone was approximately $1.5 billion lower than in the fourth quarter of 2019 – a decrease of 48% compared to before the pandemic, suggesting an annual reduction of over $5.5 billion going forward. … Continue Reading
OCC and FDIC address overdraft and NSF fee practices
By Scott A. Coleman & Kristen E. Larson on
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
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
By John L. Culhane, Jr. on
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
By Kristen E. Larson on
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
By Kristen E. Larson on
Posted in Litigation and Court Decisions, Overdrafts
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