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CFPB Issues Guidance on Authorized Positive Settle Negative Overdraft Fees
On October 26, 2022, the CFPB published a circular concerning the assessment practices of unanticipated overdraft fees, all financial institutions should read this guidance; however, its generally only applicable to institutions with an overdraft program which use the available balance for determining overdrafts. These are the same overdraft fees that the CFPB referred to as “surprise overdraft fees” in its recent $191 million order with Regions Bank. The FDIC has also weighed in on these types of overdraft fees in a 2019 Consumer Compliance Supervisory Highlights publication. “APSN” or, authorize positive settle negative, is the occurrence of a transaction that authorizes on a positive balance but settles on a negative balance, thus incurring a fee. The fee(s) charged for APSN transactions have been considered unfair and abusive by the CFPB and can be considered as such even with the presence of clear disclosures. The circular highlights that although a bank may provide disclosures related to transaction processing and overdraft assessment policies, these may still leave the consumer in doubt of when their transactions will post and will they incur fees. The October circular notes that considering the complex systems used by financial institutions, examiners should closely scrutinize whether and when charging overdraft fees may be contrary to Federal consumer financial law. Considering the general policy statements and blog posts, banks should analyze their fee polices to identify any fees that could be considered “unanticipated” or “junk” fees.

The CFPB continues to “promulgate” via policy statements, circulars, and the like; however, clear guidance via law or regulation seem to not be a priority. By only issuing these policy statements, which do not impose any legal requirements, the CFPB has made it difficult for banks that are seeking to comply with the rules. However, in an October press release The White House has noted NSF fees, overdraft fees, and credit card late payment fees as “junk fees”. We will all have to wait and see if any law or regulation is promulgated or if additional guidance will be provided by the CFPB or any of the other prudential regulators on these issues.

Copuright 2022. Author: Andrew Howard
Steve H. Powell & Co. (link)
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