#2022-29, October 28, 2022

CFPB Issues Fees Guidance on Overdraft and Depositors

Earlier this week, the Consumer Financial Protection Bureau (CFPB) issued guidance regarding certain overdraft and depositor bank fees, calling the fees “are likely unfair and unlawful.”  The guidance is part of a broader Biden administration announcement directing federal agencies to act against so-called “junk fees” and “surprise billing" in several industries, including banking, cable and internet bills, and airline and concert tickets.

According to the guidance, financial institutions may engage in an unlawful practice when they authorize a transaction on sufficient funds in the customer’s account but charges an overdraft fee when the transaction posts against insufficient funds in the account (“authorized positive, settled negative,” (APSN) transactions).  In addition, the Bureau states that financial institutions “can generally stay on the right side of the law when they employ more tailored fee policies that charge depositor fees only in situations where a depositor could have avoided the fee, such as when a depositor repeatedly deposits bad checks from the same originator.”

As you know, all bank fees and charges are highly regulated at the federal and state levels.  In particular, Massachusetts law (Ch. 167D, Sec. 6) authorizes state-chartered banks to charge a deposit returned item (DRI) fee that, “represents its direct costs, as established annually by the commissioner, incurred for processing such check, draft or money order.”  The DRI fee is set annually by the Division of Banks and is currently $8.41.  MBA will be working with the Division and the national trade groups to determine what effect the CFPB guidance will have on the Massachusetts law.

To read more, click here.

FDIC Study Indicates Nearly 96 Percent of Households have Deposit Accounts; Number of Unbanked Falls to New Low

According to the Federal Deposit Insurance Corporation’s (FDIC) National Survey of Unbanked and Underbanked Households, nearly 96 percent of US households had a depository institution account in 2021.  An estimated 5.9 million or 4.5 percent of households were unbanked, the lowest rate since the biennial survey began in 2009.

The FDIC notes that about 1.9 million more households were banked than in 2019 and that while unbanked rates were higher among some racial and ethnic minority groups, the gaps had decreased.  The unbanked rate fell by 2.5 percentage points for Black households, 2.9 points for Hispanic households and 9.4 percent for Native American and Alaska Native households, compared with a 0.4 percent decline for white households.

The study states that just over 20 percent of unbanked households said a lack of funds to meet minimum balance requirements as the main reason for not having an account, with a lack of trust in banks being the second most-cited reason.  The survey also collected data about a broader “underbanked” category, which was not measured in 2019.  This category, which includes households that used nonbank products, encompasses approximately 18.7 million households.

To read more, click here.

CFPB Proposes Data-Sharing Rules

This week, the CFPB outlined proposals to implement Section 1033 of the Dodd-Frank Act, which require businesses to make a consumer’s financial information available to them or a third party at the consumer's direction.  The Bureau is considering proposals that would allow consumers who want to switch providers to transfer their account history to a new company, so they do not have to start over if they are unsatisfied with the service provided by an incumbent firm.

There are also proposals under consideration that include options around privacy for personal financial data authorized for third-party use, including limitations that would prevent third parties from reselling authorized data for other uses.  The CFPB is required by law to convene a small business review panel to consult with representatives of small entities likely to be affected by the regulations the agency is considering.  The panel will prepare a report on the input received from the small entities, which the CFPB will consider as it develops a proposed rule.  Comments must be submitted by January 25, 2023.

To read more, click here.