Consumer Financial Protection Bureau Signals Stricter Enforcement of "unfair" Banking Fees

• Jurisdiction: United States,Federal
• Citation: Vol. 1 No. 2
• Publication year: 2023
• topic: Banking and Finance Law,Consumer Law

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Clifford S. Stanford, Brendan Clegg, and Caroline K. Eisner ^*

In this article, the authors explain how the Consumer Financial Protection Bureau plans on regulating bank fees and outline what banks can do to prepare for agency scrutiny.

Building on a current governmental focus on banking overdraft practices, the Consumer Financial Protection Bureau (CFPB) has issued compliance Bulletin 2022-06, ¹ regarding unfair returned deposited item fee assessment practices, and Circular 2022-06, ² regarding unanticipated overdraft fee assessment practices. Together, the bulletin and circular provide a view of the CFPB's theory behind the recent increased regulatory scrutiny of deposit account-related fees.

CFPB Reproach of APSN Overdraft and Deposit Item Fees

The specific guidance in the bulletin and circular addresses two categories of fees that the CFPB claims come as surprises to consumers: returned item fees and authorize positive, settle negative (APSN) fees. Such fees, says the CFPB, may well be unavoidable to a customer and not outweighed by countervailing benefits or business considerations. Accordingly, the bulletin and circular state that these fees are "unfair" under the Consumer Financial Protection Act (CFPA).

Returned Item Fees

The bulletin addresses fees incurred when checks are deposited but do not clear, either in the form of a returned item fee

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on a depositor customer or a nonsufficient funds (NSF) fee on an originator customer. Specifically, the bulletin targets the fees that depositor customers incur if they attempt to deposit checks that cannot clear, either because there are insufficient funds to clear, because a stop payment order was issued by the originator's depository institution, or because the originating account has been closed. The CFPB points out that depositor customers are unlikely to know that a check they attempt to deposit will not clear and also cannot verify with the originator's depository institution whether the check will clear. In some factual scenarios, a returned item fee could be imposed more reasonably, such as when a depositor customer repeatedly deposits bad checks from the same originator or attempts to deposit unsigned checks. But according to the CFPB, "[b]lanket policies of charging Returned Deposited Item fees to consumers for all returned transactions irrespective of the circumstances of the transaction or patterns of behavior on the account are likely unfair."

APSN Fees

The circular...