CFPB’s Proposed Rule Would Prohibit Fees on Transactions Declined Instantly

The CFPB recently issued a proposed rule that would prohibit a new category of nonsufficient fund fees on transactions that are immediately declined, by defining such fees as an abusive act or practice under the CFPA. 

Under the proposed rule, covered institutions would be prohibited from charging a fee for an attempt to withdraw, debit, pay, or transfer funds from a consumer account that is declined instantaneously or near-instantaneously due to insufficient funds.  The proposed rule would not cover attempts that are declined hours or days after due to insufficient funds, or attempts that were initially authorized but later rejected due to insufficient funds. 

Additionally, the CFPB proposes to offer additional interpretation to “clarify” previous guidance concerning what constitutes an abusive act or practice under the CFPA. 

The deadline to submit comments on the proposed rule is March 25, 2024.