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Regulators want to stop banks from charging consumers for insufficient funds
It's the latest salvo in the government's campaign against so-called "junk
fees," which President Biden said last year harm "working folks" and drive up
costs for consumers.


BUSINESS


REGULATORS TARGET FEES FOR CONSUMERS WHO ARE DENIED A PURCHASE FOR INSUFFICIENT
FUNDS

January 25, 20245:01 AM ET

By 

Joe Hernandez

Enlarge this image

A credit card is placed into a machine for processing payments on Sept. 11 in La
Puente, Calif. Frederic J. Brown/AFP via Getty Images hide caption

toggle caption
Frederic J. Brown/AFP via Getty Images


A credit card is placed into a machine for processing payments on Sept. 11 in La
Puente, Calif.

Frederic J. Brown/AFP via Getty Images

The Biden administration wants to stop financial institutions from charging fees
to customers who try to make purchases without enough money in their accounts
and are immediately denied.

It's the latest salvo in the government's campaign against so-called "junk
fees," which President Biden said last year harm "working folks" and drive up
costs for consumers.

The Consumer Financial Protection Bureau announced Wednesday that it was
proposing a rule to bar banks, credit unions and other institutions from
immediately denying a customer's transaction for insufficient funds to cover it
and then levying a fee on top of that.

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"Banks should be competing to provide better products at lower costs, not
innovating to impose extra fees for no value," CFPB Director Rohit Chopra said
in a statement.

Some financial institutions allow customers to "overdraft" their accounts,
meaning the customer spends more money than they have on hand. The bank lends
them the extra cash and charges an overdraft fee.

The CFPB wants to stop financial institutions from charging the customer a fee
after denying a transaction for insufficient funds.

Regulators said companies almost never charge such fees, but emphasized that
they were proposing the rule proactively to prevent such fees from becoming more
mainstream in the future.

Critics in the financial sector who have pushed back against the Biden
administration's war on "junk fees" questioned why the CFPB would attempt to bar
a fee that's uncommon.

"Today's CFPB press release conjures up a bank fee that the Bureau itself
concedes few – if any – banks charge and proposes a rule to prevent banks from
charging this mysterious fee in the future," said Rob Nichols, president and CEO
of the American Bankers Association.

"As an independent regulator, the Bureau should leave politics to the campaign
trail," Nichols added.

Earlier this month, the CFPB announced a plan to lower overdraft fees to as low
as $3 or allow banks to charge higher fees if they showed regulators their cost
data.

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 * banking

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