CFPB and credit unions clash on fee income reporting and protections

The fight against overdraft and NSF fees has been a popular topic in the financial industry over the last few years, as the Biden Administration has worked to eliminate those it considers “junk fees” in the name of consumer protection. Opponents argue that financial institutions such as credit unions have relied on this income for too long and have reached near-predatory levels with the amount and frequency at which they charge.

Credit unions and trade organizations have been staunchly against these measures, stating that overdraft fees protect consumers by allowing them to complete transactions—such as paying rent, buying groceries, getting gas, etc.—even when they lack the funds. To remove these fees would prevent consumers from making these purchases and ultimately put them at risk while also significantly lowering income for the financial institution, they say.

Now, in a recent report on overdraft and NSF fee income, the Consumer Financial Protection Bureau (CFPB) reports that since 2019, overdraft and NSF fee revenue have dropped a whopping $6.1 billion ($4 billion for overdraft and $2 billion for NSF fees respectively) as a result of the organization’s measures to protect low-income families. A decrease of over 50% to pre-pandemic levels and a drop of 24% from 2022 to 2023.

Additionally, the report notes that since the CFPB heightened its protections in 2022, financial institutions “agreed to refund over $240 million to consumers—approximately $177 million in unfair unanticipated overdraft fees charged on transactions that were authorized when the consumer had sufficient funds and approximately $64 million in NSF fees charged on the same transaction that already incurred an NSF fee when it was previously declined.”

 

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