CFPB proposes rule to prohibit potential new NSF fees

In anticipation of potential new NSF fees for transactions rejected "right at the swipe, tap, or click," the CFPB has announced a proposed new rule that would prevent non-sufficient funds fees on transactions that financial institutions decline in real time. These types of transactions include declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer payments. The proposed rule would cover banks, credit unions, and certain peer-to-peer payment companies.

Financial institutions almost never charge fees for transactions that are declined in real time at the swipe, tap, or click. For example, a $100 grocery purchase with a debit card may be declined in real time when the account only has $90. These types of transactions are not processed like Automated Clearing House transactions, and are generally not assessed fees. The CFPB said it is taking proactive steps to ensure that financial institutions do not impose these fees, which can occur for a host of reasons that are out of the consumer’s control. Specifically, as technology advances, financial institutions may be able to decline more transactions right at the swipe, tap, or click. These transactions include ATM, debit or prepaid card, online transfer, in-person bank teller, and certain person-to-person transactions. The CFPB’s proposed rule would consider fees for transactions declined in real time to be abusive and unlawful under the Consumer Financial Protection Act.

The proposal would add new Part 1042, "Nonsufficient Funds Fees," to Chapter X of Title 12 of the Code of Federal Regulations. Comments on the proposal will be accepted through March 25, 2024.

PUBLICATION UPDATE: Published at 89 FR 6031 in the January 31, 2024, Federal Register.

Status update: On January 14, 2025, the CFPB published its withdrawal of this proposed rule.