Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

CFPB proposes ban on junk fees charged by banks for non-sufficient funds

Consumer Reports praises Bureau’s proposal to prohibit fees when banks decline transactions at the tap, swipe or click 

WASHINGTON, D.C. – Financial institutions would be prohibited from charging a junk fee if they decline a transaction in real time when consumers tap, swipe or click to make a payment or withdrawal from their account under a proposal announced today by the Consumer Financial Protection Bureau. Consumer Reports applauded the CFPB for taking this proactive step on non-sufficient fund fees as part of its effort to protect consumers from excessive financial junk fees.

“Banks should not be allowed to charge a non-sufficient fund fee when they have already declined a consumer’s transaction,” said Chuck Bell, advocacy program director for Consumer Reports. “Non-sufficient fund fees are a classic junk fee since banks are charging a fee even though they are not providing a service. The CFPB’s proposal will protect economically vulnerable consumers who shouldn’t be unfairly penalized with a predatory fee that makes it harder for them to stay on track financially.”

The CFPB’s proposal covers declined debit card purchases and ATM withdrawals and some declined peer-to-peer payments. In its announcement today, the CFPB acknowledged that financial institutions rarely charge fees when transactions are declined in real time at the swipe, tap or click. However, the Bureau is taking this step to prevent banks from imposing non-sufficient fund fees in these cases as the technology for processing transactions continues to advance.

Last week, the CFPB proposed limits on overdraft fees charged by banks. Overdraft fees are charged by banks that temporarily cover a transaction when consumers overdraw their accounts. The proposal by the CFPB would require large banks and credit unions to abide by Truth in Lending Act protections, including disclosing the interest rate so consumers have a clear understanding of the full costs associated with overdrafts. Alternatively, the CFPB proposal gives large banks the option of charging a fee in line with an established benchmark ranging between $3-14 or their actual costs. The CFPB is seeking comment on the appropriate amount for the benchmark. The Bureau estimates that the new limits will save consumers $3.5 billion or more annually.

Michael McCauley, michael.mccauley@consumer.org