Last week, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed rule with request for public comment to prohibit covered financial institutions from charging nonsufficient funds fees (NSF) for payment transactions that are instantaneously declined. The proposed rule would treat fees for transactions declined in real time to be unlawful under the Consumer Financial Protection Act.

By itself, the proposed rule will have limited impact since, as the Bureau states in its press release announcing the proposed rule, financial institutions rarely charge fees for transactions declined in real time. Thus, the proposal is likely to have significantly less impact than last week’s proposal, discussed here, to amend exemptions to Regulation Z so the Truth in Lending Act (TILA)/Regulation Z would apply to certain overdraft “credit.” Under last week’s proposal, an institution subject to the rule would have to provide full TILA disclosures and comply with other substantive TILA requirements for overdraft fees if they exceed costs or a low CFPB safe harbor amount.

The CFPB’s new proposed rulemaking continues its crusade against so-called “junk fees,” including the Bureau’s December report highlighting consumer experiences with overdraft and NSF fees, discussed here.

Interested parties have until March 25, 2024 to submit comments. The CFPB proposes the rule take effect 30 days after the final rule is published in the Federal Register.