US CFPB to Continue to Press Financial Institutions on NSF and Overdraft Fees

The Consumer Financial Protection Bureau (CFPB) has made no secret of its focus on (and antipathy toward) certain lawful fees charged by banks and other financial institutions. Targets of particular ire are overdraft fees and non-sufficient fund (NSF) fees. In December 2021, the agency issued a report on NSF fees; then, in January 2022, it issued a request for information on so-called “junk fees,” which included NSF fees. Then, on June 16, 2022, the agency publicly announced in a blog post that it would make NSF fees a focus of its examinations.

The post explained that the CFPB already had been “piloting a supervision effort” focusing on NSF fees and had already collected data from 20 institutions in 5 areas:

• Total annual dollar amount consumers receive in overdraft coverage compared to the amount of fees charged.
• Annual dollar amount of overdraft fees charged per active checking account.
• Annual dollar amount of NSF fees charged per active checking account.
• Prevalence of frequent overdrafters: the share of active checking accounts with more than 6 and more than 12 overdraft and/or NSF fees per year.
• Share of active checking accounts that are opted into overdraft programs for ATM and one-time debit transactions.

From there, the agency announced that it would be seeking an expanded set of information from institutions regarding their related fee practices more broadly. The 7-page questionnaire covers a wide range of topics, including the total and average amounts of fees collected in connection with NSF and overdraft fees, participation levels in overdraft protection programs, and various data points regarding how the institution’s overdraft and NSF fees operate in practice.

The CFPB explained that it would use this information “to identify institutions for further examination and review” and “share this information with other regulators.” But provided that these fees are being collected with consumer authorization and consistent with the CFPB’s own regulations, it’s not clear what the CFPB intends to do with this information. The agency has previously attempted to shame financial institutions into dropping overdraft or NSF fees by publicizing which institutions charged those fees.

Regardless, financial institutions should consider reviewing their fee practices, particularly NSF or overdraft fees, and consider the potential regulatory, litigation, reputational and other risks associated with these fees to ensure that their practices remain within their risk tolerances. The CFPB’s public statements certainly seem to indicate this is a current risk and active priority of the CFPB.