CFPB Issues Guidance to Help Banks Avoid Unlawful Charges on Deposit Accounts | So Good News

Washington, DC – Today, the Consumer Financial Protection Bureau (CFPB) issued guidance on two payment methods that may be unfair and illegal under existing laws. First of all, interest payments include additional payments made when consumers have enough money in their account to pay the interest at the time the bank approves. The second is the practice of charging an indiscriminate deposit fee to anyone who deposits a bounced check. The penalty is an unexpected shock to investors who thought they were increasing their investment.

“Americans are willing to pay for legitimate services at competitive prices, but they are frustrated when they are hit with wasteful fees for unexpected or unnecessary services that have no value to them,” said CFPB Director Rohit Chopra. “We are providing guidance on existing laws that will help law-abiding businesses that want to compete fairly and the families they serve.”

Overdraft and depositor fees may be in violation of the Consumer Financial Protection Act for unfair practices where consumers cannot avoid them. Today Consumer Financial Protection Circular on surprising overdraft fees by the CFPB’s a subsequent document on the extraordinary depositor’s fee establish when the financial institution’s background penalties may violate the law.

Amazing Savings

When a customer deposits a check that bounces, banks sometimes charge a cashier’s fee, usually $10 to $19. However, the person trying to deposit the check has no idea or control over whether the check bounces, and in some cases, that person is the one who committed the fraud. In fact, there are many reasons why checks can bounce, and the most common reason is that the originator of the check does not have enough funds in their account. Charging a depositor’s fee punishes the person who could not have expected the check to bounce, doing nothing to deter the originator from writing bad checks.

The Bulletin explains that charging these deposits indiscriminately, regardless of the circumstances, is a violation of the Consumer Financial Protection Act. Financial institutions are often on the right side of the law when they use fee-based payment methods unless the depositor would otherwise avoid a fee, such as when a depositor deposits checks repeatedly from the same originator.

Amazing Money

Overdraft fees can be a surprise fee if the customer does not reasonably expect their actions to result in a fee. For example, even if a person keeps a close eye on the money he spends in his account and manages the money he is using to avoid paying extra money, he can easily be punished when financial institutions use incomprehensible or corrupt methods.

Today Consumer Financial Protection Circular explains that when financial institutions charge sudden fees, sometimes up to $36, they may be breaking the law. This page provides examples of potential unexpected fees, including fines for purchases made in good faith. These overdraft fees occur when the bank indicates that the customer has enough funds to complete a credit card purchase at the time of the transdraft, but the customer is later charged an overdraft fee. In many cases, the financial institution relies on complicated back-office procedures to justify the payment of fees. For example, when a bank allows you to use a credit card if you have enough money in the account, it charges you later for the transaction.

In September 2022, the CFPB took action against Regions Bank for charging overdraft fees known as authorization fees. In early 2015 the CFPB, as well as other federal regulators, including the Federal Reserve, began warning financial institutions not to charge certain types of legal fees, such as those used by the States to penalize customers illegally. Regions must, among other consequences, reimburse consumers for all the fees they illegally charged since August 2018 and pay $50 million.

Today Consumer Financial Protection Circular on surprise overdraft fees and its bulletin on surprise overdraft fees and recent announcements as part of the CFPB’s junk fee initiative, one of the federal government’s many efforts to increase competition and reduce unnecessary financial burdens on American families.

Junk Fee Initiative

In January 2022, the CFPB launched a review process for fraudulent transactions that cost Americans billions of dollars. Thousands of people responded to the CFPB Request for Information and their issues and complaints about unnecessary bank charges. Since then, the CFPB has taken steps to enforce “pay-as-you-go” payments, and has announced a policy to regulate delinquent loans. Over the past year, the CFPB has published a number of investigative reports on additional fees and audits of college banks.

The CFPB has noted that financial institutions have become more competitive when it comes to fees. Earlier this year several banks announced that they were waiving overdraft fees or reforming their policies to make them more consumer-friendly. And, in recent months, several major banks have announced that they are removing insufficient funds from their accounts. The CFPB estimates that this change will mean $3 billion in savings for consumers.

Read today Consumer Financial Protection Circular, Surprise Overdraft Fee assessment .

Read today next information .

Read the CFPB’s recent action against Regions Bank over overdraft fees.

Learn about the CFPB’s work on junk fees at consumerfinance.gov/JunkFees.

Consumers can file complaints about overdraft and depositor fees, as well as about other financial products or services, by visiting the CFPB’s website or calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal whistleblower laws are encouraged to submit information to [email protected]