Letter to CFPB on the Proposed Fees for Instantaneously Declined Transactions

Dear Director Chopra,

The American Bankers Association appreciates the opportunity to comment on the CFPB’s proposal to prohibit fees for insufficient funds (NSF fees) when the transaction is instantaneously or near-instantaneously declined. Transactions covered by the proposal are one-time debit transactions, ATM transactions, and person-to-person transactions (covered transactions). The Bureau states it has preliminarily concluded that the targeted fees are abusive because they represent unreasonable advantage taking of consumers who lack awareness of the risks, costs, or conditions of a financial service or product.

The Bureau notes that these fees in covered transactions are seldom imposed but justifies its proposal on two grounds. First, the rule would ensure that institutions do not start charging the targeted fees to replace revenue lost from the Bureau's regulation of overdraft fees. Second, the Bureau states that as instantaneous payments become more commonplace, it must proactively protect consumers from the targeted fees.

ABA has several concerns with the proposal. First, the Bureau’s justifications are insufficient to support rulemaking. A purely hypothetical situation is not a basis for forming sound public policy. Instead of addressing a real problem, the proposal appears to be a means for the Bureau to advance an aggressive, overreaching interpretation of its authority to prohibit abusive acts or practices. For that reason, ABA is commenting on the proposal.

Second, as we noted in response to the Bureau's April 2023 Policy Statement on Abusive Acts or Practices (Policy Statement), the Bureau makes over-generalizations and forms conclusions that could subject almost every fee or practice to a finding of abusiveness. The Bureau's proposed approach is contrary to decades of federal policy on consumer protection and the consumer financial laws the Bureau implements, which rely primarily on disclosure to give consumers choice and promote competition.

For the reasons discussed below, we recommend that the Bureau withdraw the proposal. We also recommend that the Bureau amend its Policy Statement, responding to comments it received, and republish it for comment.

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