CA Enacts Laws Affecting NSF Fees Charged by Banks, Credit Unions

California recently enacted a law that prohibits banks and credit unions subject to the examination authority of the Commissioner of Financial Protection and Innovation from charging a consumer a nonsufficient funds (NSF) fee when the consumer’s attempt to initiate a transaction is declined instantaneously or near instantaneously by the bank or credit union due to NSF.

California also enacted a law that requires credit unions to provide notice to a member each time the credit union charges a NSF or overdraft fee that meets several requirements, including the following:

• The notice must be provided to the member using a communication method designated by the member for receiving this type of notice;
• The notice must be provided on the same business day the transaction that resulted in the fee occurred, unless it is not feasible to provide the notice that day, in which case the notice must be provided on the next business day;
• The notice contains all of the following: (i) the date of the transaction; (ii) the type of transaction; (iii) whether the transaction was declined or processed; and (iv) if applicable, the amount of the overdraft that results from the transaction, the amount necessary to return the account to a positive balance, the consequences of not returning the account to a positive balance within a certain timeframe, and the amount of time the member has to return the account to a positive balance to avoid those consequences.

In addition, the law prohibits credit unions from charging a NSF or overdraft fee exceeding $14 of the amount set by the CFPB, whichever is lower.