League Notes CFPB's 'Large Institution' Overdraft Proposal Endangers Such Programs at All Credit Unions

Today, the CFPB issued the Overdraft Notice of Proposed Rulemaking (Overdraft NPRM), which proposes to update regulations that apply to overdraft credit offered by certain financial institutions with more than $10 billion in assets (referred to as “very large financial institutions”) by amending Regulation E and Regulation Z.

As proposed, Regulation Z would generally apply to all overdraft credit provided by very large financial institutions unless (1) the overdraft fee charged to a consumer is at or below the institution’s costs and losses of providing the overdraft service, or (2) the overdraft fee charged to a consumer is set at or below a benchmark fee to be set by the CFPB. The proposal would also update several additional provisions of Regulation E and Regulation Z so that overdraft credit is no longer excepted from those provisions.

Comments on the Overdraft NPRM must be received on or before April 1, 2024.

"Your League is working its way through the 200-plus page proposed rule, but our initial take is this: While the rule targets institutions with more than $10 billion in assets, the realities of the marketplace mean that overdraft programs at all credit unions are endangered," said League President/CEO Carrie Hunt. "We know that credit unions have responsible programs that provide members a valued service at a reasonable cost. CFPB again misses the point that not all fees are abusive. They are the cost of doing business and can be a deterrent."

"Your League remains deeply concerned about the legislative and regulatory headwinds credit unions are fighting when it comes to non-interest income," said Hunt. “With today’s CFPB proposal, pending action by the Federal Reserve Board on debit card interchange fees, and an ongoing legislative battle on credit card interchange fees, every credit union needs to understand that the risk to the credit union model continues to rise and their engagement on the advocacy front is critical."

Your League will provide a more detailed analysis of the proposal in the coming days. We encourage credit unions to provide us with their feedback on the proposed rule, as well. Email Chief Advocacy Officer JT Blau at jblau@vacul.org.

You can access the Overdraft NPRM and an unofficial redline here: www.consumerfinance.gov/rules-policy/rules-under-development/overdraft-credit-very-large-financial-institutions-proposed-rule/.