Federal Register / Vol. 89, No. 21 / Wednesday, January 31, 2024 / Proposed Rules 6031 

(e) The Administrative Judge shall 

determine the day, time, and place for 

the hearing and shall decide whether 

the hearing will be conducted via video 

teleconferencing. In the event the 

individual fails to appear at the time 

and place specified, without good cause 

shown, the record in the case shall be 

closed and returned to the Manager, 

who shall then make an initial 

determination regarding the eligibility 

of the individual for DOE access 

authorization in accordance with 

§ 710.22(a)(3). 

(f) At least 7 calendar days prior to the 

date scheduled for the hearing, the 

Administrative Judge shall convene a 

prehearing conference for the purpose of 

discussing stipulations and exhibits, 

identifying witnesses, and disposing of 

other appropriate matters. The 

conference may be conducted by 

telephone, video teleconference, or 

other means as directed by the 

Administrative Judge. 

* * * * * 

■ 16. Amend § 710.26 by: 

■ a. Removing in paragraph (a) 

wherever it appears the words ‘‘his/her’’ 

and adding in their place the word 

‘‘their’’; and 

■ b. Revising paragraph (d). 

The revision reads as follows: 

§ 710.26 Conduct of hearings. 

* * * * * 

(d) DOE Counsel shall assist the 

Administrative Judge in establishing a 

complete administrative hearing record 

in the proceeding and bringing out a full 

and true disclosure of all facts, both 

favorable and unfavorable, having a 

bearing on the issues before the 

Administrative Judge. The individual 

shall be afforded the opportunity of 

presenting testimonial, documentary, 

and physical evidence, including 

testimony by the individual in the 

individual’s own behalf. All witnesses 

shall be subject to cross-examination, if 

possible. 

* * * * * 

§ 710.27 [Amended] 

■ 17. Amend § 710.27 paragraph (b), in 

the second sentence by removing the 

word ‘‘handicapped’’ and adding in its 

place, the word ‘‘prejudiced’’. 

§ 710.28 [Amended] 

■ 18. Amend § 710.28 in paragraph 

(a)(4) by removing the words ‘‘his/her’’ 

and adding in their place the word 

‘‘their’’. 

§ 710.29 [Amended] 

■ 19. Amend § 710.29 paragraph (c), in 

the first sentence by removing the words 

‘‘his/her’’ and adding in their place the 

word ‘‘their’’. 

■ 20. Amend § 710.31 by revising 

paragraphs (b)(4), (5), and (6) to read as 

follows: 

§ 710.31 Reconsideration of access 

eligibility. 

* * * * * 

(b) * * * 

(4) If, pursuant to the provisions of 

paragraph (b)(2) of this section, the 

Manager determines the individual is 

eligible for access authorization, the 

Manager shall grant access 

authorization. 

(5) If, pursuant to the provisions of 

paragraph (b)(2) of this section, the 

Manager determines the individual 

remains ineligible for access 

authorization, the Manager shall so 

notify the Director in writing. If the 

Director concurs, the Director shall 

notify the individual in writing. This 

decision is final and not subject to 

review or appeal. If the Director does 

not concur, the Director shall confer 

with the Manager on further actions. 

(6) Determinations as to eligibility for 

access authorization pursuant to 

paragraphs (b)(4) or (5) of this section 

may be based solely upon the mitigation 

of derogatory information which was 

relied upon in a final decision to deny 

or to revoke access authorization. If, 

pursuant to the procedures set forth in 

paragraph (b)(2) of this section, 

previously unconsidered derogatory 

information is identified, a 

determination as to eligibility for access 

authorization must be subject to a new 

Administrative Review proceeding. 

Appendix A to Part 710 [Removed] 

■ 21. Appendix A to part 710 is 

removed. 

[FR Doc. 2024–01874 Filed 1–30–24; 8:45 am] 

BILLING CODE 6450–01–P 

CONSUMER FINANCIAL PROTECTION 

BUREAU 

12 CFR Part 1042 

[Docket No. CFPB–2024–0003] 

RIN 3170–AB16 

Fees for Instantaneously Declined 

Transactions 

AGENCY: Consumer Financial Protection 

Bureau. 

ACTION: Proposed rule; request for 

public comment. 

SUMMARY: The Consumer Financial 

Protection Bureau (CFPB) is proposing 

to prohibit covered financial institutions 

from charging fees, such as 

nonsufficient funds fees, when 

consumers initiate payment transactions 

that are instantaneously declined. 

Charging such fees would constitute an 

abusive practice under the Consumer 

Financial Protection Act’s prohibition 

on unfair, deceptive, or abusive acts or 

practices. 

DATES: Comments must be received on 

or before March 25, 2024. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2024– 

0003 or RIN 3170–AB16, by any of the 

following methods: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. A 

brief summary of this document will be 

available at https://

www.regulations.gov/docket/CFPB2024-0003. 

• Email: 2024-NPRM-NSF@cfpb.gov. 

Include Docket No. CFPB–2024–0003 or 

RIN 3170–AB16 in the subject line of 

the message. 

• Mail/Hand Delivery/Courier: 

Comment Intake—2024 NPRM Fees for 

Instantaneously Declined Transactions, 

c/o Legal Division Docket Manager, 

Consumer Financial Protection Bureau, 

1700 G Street NW, Washington, DC 

20552. 

Instructions: The CFPB encourages 

the early submission of comments. All 

submissions should include the agency 

name and docket number or Regulatory 

Information Number (RIN) for this 

rulemaking. Commenters are 

encouraged to submit comments 

electronically. In general, all comments 

received will be posted without change 

to https://www.regulations.gov. 

All submissions, including 

attachments and other supporting 

materials, will become part of the public 

record and subject to public disclosure. 

Proprietary information or sensitive 

personal information, such as account 

numbers or Social Security numbers, or 

names of other individuals, should not 

be included. Submissions will not be 

edited to remove any identifying or 

contact information. 

FOR FURTHER INFORMATION CONTACT: 

Pavitra Bacon, Joseph Devlin, Lawrence 

Lee, or Michael G. Silver, Senior 

Counsels, Office of Regulations, at 202– 

435–7700 or https://reginquiries.

consumerfinance.gov/. If you require 

this document in an alternative 

electronic format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 


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1See Trevor Bakker et al., Consumer Fin. Prot. 

Bureau, Data Point: Checking account overdraft, at 

20 tbl. 8 (July 2014), https://files.

consumerfinance.gov/f/201407_cfpb_report_datapoint_overdrafts.pdf (CFPB 2014 Data Point). 

2 Id. 

3As explained below, covered transactions would 

include transactions that are declined 

‘‘instantaneously’’ or ‘‘near-instantaneously.’’ The 

discussion below describes the difference in 

terminology. For ease of reference, the proposal 

sometimes refers jointly to these two terms as 

‘‘instantaneously.’’ 

4See, e.g., Consumer Fin. Prot. Bureau, Data 

Point: Overdraft/NSF Fee Reliance Since 2015— 

Evidence from Bank Call Reports, at 2–3 (Dec. 

2021), https://files.consumerfinance.gov/f/ 

documents/cfpb_overdraft-call_report_2021-12.pdf 

(CFPB December 2021 Data Point); see generally 

Fed. Fin. Insts. Examination Council, Central Data 

Repository’s Public Data Distribution, https://

cdr.ffiec.gov/public/ManageFacsimiles.aspx (last 

visited Jan. 17, 2024). 

5 Generally, an overdraft fee is charged when a 

transaction (debit, payment, transfer, or 

withdrawal) that exceeds the consumer’s account 

balance is paid (covered) by the accounting-holding 

financial institution. An NSF fee is charged when 

a transaction (debit, payment, transfer, or 

withdrawal) that would exceed the account balance 

if it were paid is instead returned unpaid by the 

account-holding financial institution. Despite this 

distinction, the CFPB believes that surveys, reports, 

and studies often group these two types of fees 

together. This is in part because banks with over $1 

billion in assets report overdraft and NSF fees 

together within the ‘‘consumer overdraft-related 

service charges’’ category (see Fed. Fin. Insts. 

Examination Council, FFIEC 031 and 041, 

Instructions for Preparation of Consolidated 

Reports of Condition and Income, at RI 36, https:// 

www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_

FFIEC041_202303_i.pdf (last updated Mar. 2023)). 

In addition, either of these fees can be charged 

when a consumer’s available balance is insufficient 

to cover a transaction, and there is substantial 

overlap in the population of consumers who incur 

overdraft and NSF fees. See Consumer Fin. Prot. 

Bureau, A Closer Look: Overdraft and the Impact of 

Opting-In (Jan. 19, 2017), https://files.consumer

finance.gov/f/documents/201701_cfpb_Overdraftand-Impact-of-Opting-In.pdf (CFPB Closer Look); 

Consumer Fin. Prot. Bureau, Overdraft and NSF 

Practices at Very Large Financial Institutions (Jan. 

2024), https://files.consumerfinance.gov/f/ 

documents/cfpb_overdraft-nsf-practices-very-largefinancial-institutions_2024-01.pdf (Overdraft and 

NSF Report). 

6See, Consumer Fin. Prot. Bureau, CFPB Study of 

Overdraft Programs: A white paper of initial data 

findings, at 11 n.f, 52 (June 2013), https://

files.consumerfinance.gov/f/201306_cfpb_

whitepaper_overdraft-practices.pdf (CFPB White 

Paper). 

7For example, the median cost of issuing a 

business check is $2.01–$4.00 and the cost to 

receive a business check is $1.01–$2.00. See Ass’n 

for Fin. Profs. (underwritten by Corpay), 2022 AFP 

Payments Cost Benchmarking Survey, at 16 (Jan. 

2022), https://www.afponline.org/publicationsdata-tools/reports/survey-research-economic-data/ 

Details/paymentscost (available for download at 

https://www.corpay.com/resources/whitepapers/ 

2022-afp-payments-cost-benchmarking-survey/ 

gated). The CFPB expects that the costs for 

consumer checks to be within similar ranges. The 

median total processing cost across issuers for all 

types of debit card transactions was 11 cents per 

transaction in 2011 (see 76 FR 43394, 43397 (July 

20, 2011)) and the average per-transaction 

authorization, clearing, and settlement costs, 

excluding issuer fraud losses, among issuers 

covered by the Board’s debit card interchange fee 

rule was 3.9 cents in 2021 (Bd. of Governors of the 

Fed. Rsrv. Sys., 2021 Interchange Fee Revenue, 

Covered Issuer Costs, and Covered Issuer and 

Merchant Fraud Losses Related to Debit Card 

Transactions, at 24 (Oct. 2023), https://

www.federalreserve.gov/paymentsystems/files/ 

debitfees_costs_2021.pdf (FRB 2021 Interchange)). 

8The average value of a check payment in 2021 

was $2,430. Bd. of Governors of the Fed. Rsrv. Sys., 

The Federal Reserve Payments Study: 2022 

Triennial Initial Data Release, https://

www.federalreserve.gov/paymentsystems/frpayments-study.htm (last updated July 27, 2023) 

(FRB 2022 Payments Study). In 2022, the average 

value of a debit card transaction was $46.84. Bd. of 

Governors of the Fed. Rsrv. Sys., Regulation II 

(Debit Card Interchange Fees and Routing)— 

Average Debit Card Interchange Fee by Payment 

Card Network, https://www.federalreserve.gov/ 

paymentsystems/regii-average-interchange-fee.htm 

(last updated Sept. 23, 2022) (FRB Regulation II). 

9CFPB White Paper at 11. 

10 Id. at 52. 

11See Consumer Fin. Prot. Bureau, Data spotlight: 

Vast majority of NSF fees have been eliminated, 

saving consumers nearly $2 billion annually (Oct. 

11, 2023), https://www.consumerfinance.gov/dataresearch/research-reports/vast-majority-of-nsf-feeshave-been-eliminated-saving-consumers-nearly-2- 

billion-annually/ (CFPB October 2023 Data 

Spotlight); Consumer Fin. Prot. Bureau, Nonsufficient fund (NSF) fee practices of the 25 banks 

reporting the most overdraft/NSF revenue in 2021, 

https://files.consumerfinance.gov/f/documents/ 

cfpb_nsf-fee-banks-chart_2023-05.jpg (last visited 

Jan. 17, 2024). See also Meghan Greene et al., Fin. 

Health Network, FinHealth Spend Report 2023: U.S. 

Household Spending on Financial Services Amid 

Historic Inflation and an Uncertain Economy, at 5 

(June 2023), https://finhealthnetwork.org/wpcontent/uploads/2023/06/FinHealth-Spend-Report2023.pdf (FinHealth Spend Report 2023) 

(documenting a continued decrease in spending on 

overdraft and NSF fees, from $10.6 billion in 2021 

to $9.9 billion in 2022); Oz Shy & Joanna Stavins, 

Who Is Paying All These Fees? An Empirical 

Analysis of Bank Account and Credit Card Fees, at 

6 (Fed. Rsrv. Bank of Bos., Working Paper No. 22– 

I. Background 

A. Rulemaking Goals 

When a consumer’s attempted 

withdrawal, debit, payment, or transfer 

transaction amount exceeds the 

available funds in their account, 

currently, a financial institution might 

decline the transaction and charge the 

consumer a fee, often called a 

nonsufficient funds (NSF) fee. NSF fees 

might be charged on transactions that 

the financial institution declines within 

seconds after the payment request is 

initiated, as well as on transactions that 

are rejected hours or days after the 

initial request to pay is made. As 

discussed below, many financial 

institutions in recent years have stopped 

charging NSF fees. To the extent they 

continue to be charged currently, 

however, NSF fees are almost always 

charged only on check or Automated 

Clearing House (ACH) transaction 

declinations, which do not occur 

instantaneously. In contrast, NSF fees 

are rarely charged on Automated Teller 

Machine (ATM) or point-of-sale (POS) 

debit transaction declinations, which do 

occur instantaneously. The CFPB is 

aware of limited instances where such 

fees might be charged on the latter set 

of transactions (for example, in 

connection with prepaid accounts and 

transactions declined at ATMs that are 

outside the depository institution’s 

ATM network).1 To a similarly limited 

extent, the CFPB has also observed such 

fees being charged in connection with 

other types of transactions (such as 

online transfer and in-person bank teller 

transactions).2

The CFPB is proposing to prohibit 

covered financial institutions from 

charging NSF fees on transactions that 

are declined instantaneously or nearinstantaneously.3 As technological 

advancements may eventually make 

instantaneous payments ubiquitous, the 

CFPB believes that is important to 

proactively set regulations to protect 

consumers from abusive practices. 

B. High-Level Summary of the Proposed 

Rule 

To prevent abusive practices related 

to NSF fees on instantaneously declined 

transactions, as detailed below in part 

IV (Discussion of Proposed Rule), the 

CFPB proposes to prohibit covered 

financial institutions from charging 

such fees. The CFPB preliminarily 

concludes that charging NSF fees in 

these circumstances would constitute an 

abusive practice under the Consumer 

Financial Protection Act’s prohibition 

on unfair, deceptive, or abusive acts or 

practices. The proposal would prohibit 

financial institutions from engaging in 

this practice across all instantaneously 

declined transactions, regardless of 

transaction method (e.g., debit card, 

ATM, person-to-person). 

C. NSF Fees in the Market 

Today, the combined costs of 

overdraft and NSF fees constitute a 

higher cost to consumers than the 

combined costs of periodic maintenance 

fees and ATM fees.4 Although overdraft 

and NSF fees are distinct, many 

publications discuss them together,5

and, in recent decades, a financial 

institution’s NSF fee has typically been 

the same amount as any per-transaction 

overdraft fee it may charge.6 The 

amount of an NSF fee is typically not 

pegged to the transaction’s processing 

cost 7 or the transaction’s amount; 8

institutions generally charge a fixed 

amount per declined transaction.9 The 

CFPB’s research found that in 2012, the 

median NSF fee among 33 large 

institutions sampled was $34.10 While 

many institutions have opted to stop 

charging NSF fees within the last two 

years,11 the CFPB recently found 


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18, 2022), https://www.bostonfed.org/-/media/ 

Documents/Workingpapers/PDF/2022/wp2218.pdf 

(Boston Fed Working Paper) (finding that ‘‘[a] 

‘bounced’-check fee—assessed when the amount on 

a check exceeds the account balance—was [ ] rare, 

with only 1.0 percent of all consumers having paid 

such a fee in 2021’’). 

12One study found that consumers making under 

$30,000 a year are nearly twice as likely to incur 

an overdraft fee as those making over $30,000 (20 

percent vs. 10 percent). Pew Ctr. on the States, 

Overdraft America: Confusion and Concerns about 

Bank Practices, at 6 (May 2012), https://

www.pewtrusts.org/-/media/legacy/uploadedfiles/ 

pcs_assets/2012/sciboverdraft20america1pdf.pdf 

(Pew 2012 Survey). See also Boston Fed Working 

Paper at 6. 

13See, e.g., David Low et al., Consumer Fin. Prot. 

Bureau, Data Point: Frequent Overdrafters, at 16 tbl. 

2 (Aug. 2017), https://files.consumerfinance.gov/f/ 

documents/201708_cfpb_data-point_frequentoverdrafters.pdf (CFPB 2017 Data Point). 

14CFPB 2017 Data Point at 5; Boston Fed Working 

Paper at 6, 16 (finding that individuals with FICO 

scores of less than 600 were more likely to have 

paid NSF fees in 2021 (3.5 percent) than the average 

consumer; that individuals with scores above 800 

were significantly less likely to have done so (0.1 

percent); and that this disparity also applied to 

overdraft fees although to a starker extent (32.0 

percent versus 2.3 percent)). 

15FinHealth Spend Report 2023 at 12 (describing 

‘‘Financially Healthy’’ individuals as ‘‘able to 

manage their day-to-day expenses, absorb financial 

shocks, and progress toward meeting their longterm financial goals’’). 

16 Id. (describing ‘‘Financially Vulnerable’’ 

individuals as ‘‘struggling with almost all aspects of 

their financial lives’’). 

17FinHealth Spend Report 2023 at 7. 

18CFPB 2017 Data Point at 13. 

19 Joe Valenti, Overdraft fees can price people out 

of banking, Consumer Fin. Prot. Bureau (Mar. 30, 

2022), https://www.consumerfinance.gov/about-us/ 

blog/overdraft-fees-can-price-people-out-ofbanking/. 

20Fed. Deposit Ins. Corp., 2021 FDIC National 

Survey of Unbanked and Underbanked Households, 

at 2 (Oct. 2022), https://www.fdic.gov/analysis/ 

household-survey/2021report.pdf (FDIC 2021 

Survey). 

21Emily Cubides & Shaun O’Brien, Fed. Rsrv. 

Bank of S.F., 2023 Findings from the Diary of 

Consumer Payment Choice, at 4, 6 (May 2023), 

https://www.frbsf.org/cash/wp-content/uploads/ 

sites/7/2023-Findings-from-the-Diary-of-ConsumerPayment-Choice.pdf. 

22 Id. at 7–8 (20 percent of purchases and personto-person (P2P) payments were made remotely or 

online in 2020 and 2021 versus 13 percent of such 

payments in 2019). 

23 Id. at 8 (‘‘Consumers prefer credit cards because 

of the perceived convenience, lower rates of cash 

acceptance, and the ease of record keeping as 

compared to cash.’’). 

24See Kevin Foster et al., The 2021 Survey and 

Diary of Consumer Payment Choice: Summary 

Results, at 7 (Sept. 2022), https://

www.atlantafed.org/-/media/documents/banking/ 

consumer-payments/survey-diary-consumerpayment-choice/2021/sdcpc_2021_report.pdf 

(finding that 66.4 percent of all consumers had 

adopted one or more payment applications in the 

previous 12 months—a share that was nearly 20 

percent higher than five years earlier). 

25Check Clearing for the 21st Century Act, Public 

Law. 108–100, 117 Stat. 1177 (2003). 

26Fed. Fin. Insts. Examination Council, Check 

Clearing for the 21st Century Act Foundation for 

Check 21 Compliance Training, https://

www.ffiec.gov/exam/check21/check21foundation

doc.htm (last visited Jan. 17, 2024). 

27Bd. of Governors of the Fed. Rsrv. Sys., 

Frequently Asked Questions about Check 21, 

https://www.federalreserve.gov/paymentsystems/ 

regcc-faq-check21.htm (last visited Jan. 17, 2024). 

28See Regulation E, 12 CFR 1005.17(b)(2). 

29CFPB Closer Look at 4. 

30 Id. at 2. 

31 Id. at 1; see also Pew 2012 Survey at 1. 

32 In 2010, card issuers reported that their median 

per-transaction cost of nonsufficient funds handling 

was one cent. 76 FR 43394, 43398 (July 20, 2011). 

Since then, the transacted weighted average cost of 

nonsufficient funds handling has fallen to $0.005. 

FRB 2021 Interchange at 39 tbl. 14A. Nonsufficient 

funds handling costs were described in the survey 

as ‘‘[c]osts of handling of events in which an 

Continued 

through its market monitoring that, 

among institutions above $10 billion in 

assets still charging such fees, the 

median fee is $32. 

1. NSF Fee Impacts on Certain 

Consumer Populations 

Overdraft and NSF fees tend to be 

incurred by consumers with higher 

financial vulnerability (including those 

with lower incomes 12 and lower credit 

scores 13). The CFPB has previously 

found that individuals with more 

overdraft and NSF fees in the prior year 

tend to have lower account balances and 

tend to be more credit-constrained than 

other consumers, as they have lower 

average credit scores, are less likely to 

possess a general-purpose credit card, 

have less available credit when they do 

have such cards, and more often possess 

thin credit files.14 Researchers also 

found that only 4 percent of 

‘‘Financially Healthy’’ 15 households 

with checking accounts reported paying 

an overdraft or NSF fee in 2022, 

compared with 46 percent of 

‘‘Financially Vulnerable’’ 16

households.17 According to a CFPB 

study, 9 percent of all accounts at the 

studied banks paid nearly 80 percent of 

combined overdraft and NSF fees.18

Beyond the impact of having 

insufficient funds, incurring NSF fees 

can negatively affect a consumer’s 

overall perceptions of whether the 

banking system is fair, transparent, and 

competitive.19 The Federal Deposit 

Insurance Corporation (FDIC) has found 

that among unbanked households in 

2021, almost three in ten (29.2 percent) 

cited as a main reason for not having an 

account concerns related to fees or 

minimum balance requirements—‘‘Bank 

account fees are too high,’’ ‘‘Bank 

account fees are too unpredictable,’’ or 

‘‘Don’t have enough money to meet 

minimum balance requirements.’’ 20

2. The Rise of Noncash Payments 

When NSF fees are charged, they are 

almost always charged exclusively in 

connection with noncash payments 

(that is, ACH, cards, mobile application 

payments, and checks), the use of which 

has grown rapidly due in large part to 

technological and regulatory changes. In 

a recent study, the Federal Reserve Bank 

of San Francisco (FRBSF) found that 

generally, consumers are shifting away 

from cash and increasingly making card 

payments.21 The FRBSF attributed this 

shift in large part to consumers making 

a greater share of purchases remotely 

when compared to before the COVID–19 

pandemic 22 and to increased preference 

for card payments.23 In addition, 

consumers are increasingly adopting 

newer noncash payment methods, such 

as those initiated through digital 

applications.24 This shift away from 

cash by banks also coincided with 

certain regulatory developments—such 

as the enactment of the Check Clearing 

for the 21st Century Act (Check 21), a 

Federal law that took effect in 2004.25

Check 21 provided that a properly 

prepared paper reproduction of an 

original check (a ‘‘substitute check’’) is 

the legal equivalent of an original paper 

check 26 and allowed banks to avoid the 

‘‘inefficient and costly’’ 27 transportation 

of paper checks. 

3. Government Regulation of Noncash 

Payments and NSF Fees 

The rise in noncash payments also 

prompted regulatory interventions 

necessary to protect consumers. For 

example, in 2009, the Board of 

Governors of the Federal Reserve 

System (Board) amended Regulation E, 

which was subsequently recodified by 

the CFPB, to require financial 

institutions to obtain account holders’ 

affirmative consent (i.e., their ‘‘opt-in’’) 

for overdraft coverage of ATM and onetime (non-recurring) POS debit card 

transactions before the financial 

institution could charge a fee for paying 

such overdraft transactions (2009 Opt-in 

Rule).28 Following implementation of 

that rule, the CFPB found that 

consumers who opted in pay 

significantly more fees than consumers 

who do not opt in (i.e., opted-in 

consumers paid on average $22 per 

month in overdraft and NSF fees while 

non-opted-in consumers paid on 

average $3 per month).29 The CFPB also 

found that if a consumer has not opted 

in, depository institutions typically will 

not authorize any ATM or one-time 

debit card transactions if there are 

insufficient funds at the time the 

transaction is attempted.30 These 

institutions rarely charge an NSF fee 

when declining an ATM transaction or 

a debit card authorization inquiry at a 

merchant POS,31 likely for two reasons. 

First, the cost of declining such 

transactions has always been trivial.32


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account does not have enough funds to settle an 

authorized debit card transaction between the time 

of authorization of that transaction and the 

settlement of that transaction.’’ Id. at 28 n.25. Based 

on this description, the cost of handling events in 

which the debit card transaction was not authorized 

is likely even lower. 

33See 74 FR 59033, 59041 (Nov. 17, 2009). 

34Through its enforcement work, the CFPB 

recently found that one bank had violated the 

Consumer Financial Protection Act’s prohibition on 

deceptive practices by, among other things, 

misleading deposit account holders into thinking 

that they would incur NSF fees on one-time debit 

card and ATM transactions if they chose not to 

exercise their rights to opt into overdraft coverage 

under Regulation E. See Atlantic Union Bank, File 

No. 2023–CFPB–0017, at 11 ¶ 26 (Dec. 7, 2023). 

35This rule implemented the provisions of 

section 1075 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, which amended the 

Electronic Fund Transfer Act (15 U.S.C. 1693 et 

seq.) by adding a new section 920 regarding 

interchange transaction fees and rules for payment 

card transactions. 

36Bd. of Governors of the Fed. Rsrv. Sys., 2011 

Interchange Fee Revenue, Covered Issuer Costs, and 

Covered Issuer and Merchant Fraud Losses Related 

to Debit Card Transactions, at 2 (Mar. 5, 2013), 

https://www.federalreserve.gov/paymentsystems/ 

files/debitfees_costs_2011.pdf. More recently, the 

Board requested comment on a proposal to lower 

the maximum interchange fee that a large debit card 

issuer can receive for a debit card transaction and 

to establish a regular process for updating the 

maximum amount every other year going forward. 

See 88 FR 78100 (Nov. 14, 2023). 

37See FRB Regulation II; Rick Rothacker, Under 

pressure, Bank of America drops $5 debit card fee 

(Nov. 1, 2011), https://www.reuters.com/article/usbankofamerica-debit/under-pressure-bank-ofamerica-drops-5-debit-card-feeidUSTRE7A04E120111101/; Samantha Cornell, 

BofA to Impose Debit Card Fee: Will Competitors 

and Consumers Stay on Board of Jump Ship?, 

Fordham J. Corp. & Fin. L. (Oct. 31, 2011), https:// 

news.law.fordham.edu/jcfl/2011/10/31/bofa-toimpose-debit-card-feed-will-competitors-andconsumers-stay-on-board-of-jump-ship/; Press 

Release, The Fin. Brand, BofA’s $5 Monthly Debit 

Fee: The Backlash, The Fallout and What It All 

Means (Oct. 4, 2011), https://thefinancialbrand.

com/news/checking-accounts/bank-of-americadebit-card-fee-fallout-19989/. 

38Press Release, Consumer Fin. Prot. Bureau, 

Consumer Financial Protection Bureau Launches 

Initiative to Save Americans Billions in Junk Fees 

(Jan. 26, 2022), https://www.consumerfinance.gov/ 

about-us/newsroom/consumer-financial-protectionbureau-launches-initiative-to-save-americansbillions-in-junk-fees/. 

39 87 FR 5801 (Feb. 2, 2022). 

40Press Release, Consumer Fin. Prot. Bureau, 

CFPB Moves to Reduce Junk Fees Charged by Debt 

Collectors (June 29, 2022), https://

www.consumerfinance.gov/about-us/newsroom/ 

cfpb-moves-to-reduce-junk-fees-charged-by-debtcollectors/. 

41 88 FR 18906 (Mar. 29, 2023). 

42See, e.g., CFPB December 2021 Data Point; 

CFPB October 2023 Data Spotlight; Consumer Fin. 

Prot. Bureau, Data spotlight: Overdraft/NSF revenue 

down nearly 50% versus pre-pandemic levels (May 

24, 2023), https://content.consumerfinance.gov/ 

data-research/research-reports/data-spotlightoverdraft-nsf-revenue-in-q4-2022-down-nearly-50- 

versus-pre-pandemic-levels/full-report/. See also 

Consumer Fin. Prot. Bureau, Trends in overdraft/ 

non-sufficient fund (NSF) fee revenue and 

practices, https://www.consumerfinance.gov/dataresearch/research-reports/trends-in-overdraftnonsufficient-fund-nsf-fee-revenue-and-practices/ (last 

updated May 24, 2023) (CFPB Overdraft/NSF 

Trends). 

43Consumer Fin. Prot. Bureau, College Banking 

and Credit Card Agreements (Oct. 2022), https://

files.consumerfinance.gov/f/documents/cfpb_

college-banking-report_2022.pdf. 

44Consumer Fin. Prot. Bureau, The Consumer 

Credit Card Market, at 52 (Sept. 2021), https://

files.consumerfinance.gov/f/documents/cfpb_

consumer-credit-card-market-report_2021.pdf. 

45 88 FR 71279 (Oct. 16, 2023). 

46 88 FR 80197 (Nov. 17, 2023). 

47Consumer Fin. Prot. Bureau, Supervisory 

Highlights: Junk Fees Special Edition, Issue 29, 

Winter 2023, at 5–6 (Mar. 2023), https://

files.consumerfinance.gov/f/documents/cfpb_

supervisory-highlights-junk-fees-special-edition_

2023-03.pdf. 

48Press Release, Consumer Fin. Prot. Bureau, 

CFPB Takes Action Against Bank of America for 

Illegally Charging Junk Fees, Withholding Credit 

Card Rewards, and Opening Fake Accounts (July 

11, 2023), https://www.consumerfinance.gov/aboutus/newsroom/bank-of-america-for-illegallycharging-junk-fees-withholding-credit-cardrewards-opening-fake-accounts/. 

49Consumer Fin. Prot. Bureau, Supervisory 

Highlights Junk Fees Update Special Edition, Issue 

31, Fall 2023, at 4–6, 10, 17 (Oct. 2023), https://

files.consumerfinance.gov/f/documents/cfpb_

supervisory_highlights_junk_fees-update-specialed_2023-09.pdf. 

50As noted above, Federal agencies have also 

taken recent actions to address fees that are not 

subject to competitive processes. For example, in 

October 2023, the FTC issued a proposed rule that 

would prohibit businesses across the economy from 

charging hidden and misleading fees, require the 

full price up front, and provide for monetary 

penalties and consumer refunds when violated. 

Press Release, Fed. Fin. Insts. Examination Council, 

FTC Proposes Rule to Ban Junk Fees (Oct. 11, 2023), 

https://www.ftc.gov/news-events/news/pressreleases/2023/10/ftc-proposes-rule-ban-junk-fees. 

51See Bd. of Governors of the Fed. Rsrv. Sys., 

Compliance Spotlight—Supervisory Observations 

on Representment Fees, Consumer Compliance 

Outlook (Second Issue 2023), https://

www.consumercomplianceoutlook.org/2023/ 

second-issue/compliance-spotlight/ (last visited Jan. 

17, 2024). 

52Off. of the Comptroller of the Currency, OCC 

Bulletin 2023–12: Overdraft Protection Programs: 

Risk Management Practices (Apr. 26, 2023), https:// 

www.occ.treas.gov/news-issuances/bulletins/2023/ 

bulletin-2023-12.html. 

Second, in its preamble to the 2009 OptIn Rule, the Board wrote that such fees 

‘‘could raise significant fairness issues’’ 

under the Federal Trade Commission 

(FTC) Act because ‘‘the institution bears 

little, if any, risk or cost to decline 

authorization of an ATM or one-time 

debit card transaction.’’ 33 The CFPB 

understands that many financial 

institutions interpret that language to 

suggest that charging NSF fees in these 

circumstances would violate the FTC 

Act’s unfairness prohibition, and have 

oriented their practices to charge fees 

generally only when overdraft coverage 

is provided on ATM and one-time debit 

card transactions and to not charge fees 

when those transactions are declined.34

Another impactful change in the 

noncash market came in 2011 when the 

debit card interchange fee standard in 

Regulation II 35 first went into effect, 

capping the interchange fee that a larger 

debit card issuer may charge or 

receive.36 In response to this rule, some 

financial institutions initially sought to 

replace the lost revenue with debit 

usage fees, but then quickly abandoned 

such efforts, largely due to public 

displeasure and pressure.37

More recently, there has been an effort 

across the Federal Government to 

eliminate fees that are not subject to the 

competitive processes to ensure fair 

pricing. In January 2022, the CFPB 

launched an initiative to reduce certain 

fees charged by banks and other 

companies under its jurisdiction.38

Soon after, the CFPB issued a Request 

for Information (RFI) regarding anticompetitive fees in banking,39 took 

action to constrain ‘‘pay-to-pay’’ fees,40

and announced a proposed rulemaking 

on credit card late fees.41 The CFPB also 

published several research reports on 

overdraft/NSF fees,42 an analysis of fees 

on college banking products,43 and a 

report on credit cards.44 Most recently, 

the CFPB issued guidance to stop large 

banks from charging illegal fees for basic 

customer service 45 and proposed to 

supervise larger nonbank companies 

that offer services like digital wallets 

and payment applications.46

The CFPB’s recent supervisory and 

enforcement activity has also focused, 

in part, on certain types of NSF fees. In 

its supervisory work, the CFPB has cited 

financial institutions for engaging in 

several problematic practices related to 

deposit account fees, including 

assessing certain types of NSF fees. For 

example, the CFPB previously found 

that some institutions engaged in unfair 

acts or practices by assessing multiple 

NSF fees for the same transaction.47 The 

CFPB also took concurrent action with 

the Office of the Comptroller of the 

Currency (OCC) addressing this 

practice, among others.48 Most recently, 

the CFPB discussed its supervisory 

findings related to the charging of 

multiple NSF fees for the same 

transaction and of returned deposit item 

fees.49

Other Federal agencies have also 

taken actions to address certain 

practices related to NSF fees.50 In 

September 2023, the Board issued a 

supervisory statement noting it had 

cited NSF representment fees as 

unfair.51 In April 2023, the OCC issued 

a bulletin that found, among other 

things, that the practice of assessing an 

additional NSF fee on a representment 

transaction was, in some instances, 

unfair and deceptive.52 In August 2022, 

the FDIC issued supervisory guidance 

stating that practices involving the 

charging of multiple NSF fees arising 


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53Fed. Deposit Ins. Corp., FIL–40–2022, 

Supervisory Guidance on Multiple Re-Presentment 

NSF Fees (Aug. 2023), https://www.fdic.gov/news/ 

financial-institution-letters/2022/fil22040.html. 

54 84 FR 51942 (Oct. 1, 2019). 

55See Consumer Fin. Prot. Bureau, Data 

Spotlight: Banks’ overdraft/NSF fee revenue 

declines significantly compared to pre-pandemic 

levels (Feb. 7, 2023), https://www.consumer

finance.gov/data-research/research-reports/banksoverdraft-nsf-fee-revenue-declines-significantlycompared-to-pre-pandemic-levels/. 

56See CFPB October 2023 Data Spotlight. 

57 Id. 

58Press Release, Consumer Fin. Prot. Bureau, 

CFPB Launches Inquiry into Overdraft Practices 

(Feb. 22, 2012), https://www.consumerfinance.gov/ 

about-us/newsroom/consumer-financial-protectionbureau-launches-inquiry-into-overdraft-practices/. 

59 77 FR 12031 (Feb. 28, 2012). The RFI 

specifically defined overdraft fees to include, 

among other things, fees for returned checks, which 

the RFI termed NSF fees. See id. at 12033 (‘‘[W]e 

use the terms ‘overdraft’ and ‘overdraft fee’ broadly 

to refer to practices followed and fees charged when 

a consumer initiates a transaction for which there 

are insufficient funds in the consumer’s checking 

account. Specifically, the term overdraft fee 

includes fees charged for a returned check (e.g., an 

NSF fee), fees charged when an overdraft item is 

paid (i.e., an overdraft coverage fee), and fees 

charged if an overdraft is not repaid within a 

specified period of time.’’). 

60See CFPB White Paper at 8; CFPB 2014 Data 

Point at 6–7. 

61See CFPB White Paper; CFPB 2014 Data Point; 

CFPB 2017 Data Point. 

62Nicole Kelly & E ́ va Nagypa ́l, Ph.D., Consumer 

Fin. Prot. Bureau, Data Point: Checking Account 

Overdraft at Financial Institutions Served by Core 

Processors (Dec. 2021), https://files.

consumerfinance.gov/f/documents/cfpb_overdraftcore-processors_report_2021-12.pdf. 

63 Id. 

64See CFPB Overdraft/NSF Trends (reflecting 

data and analysis published periodically from Dec. 

1, 2021 to present). 

65Patrick Gibson & Lisa Rosenthal, Measuring the 

impact of financial institution overdraft programs 

on consumers, Consumer Fin. Prot. Bureau (June 

16, 2022), https://www.consumerfinance.gov/aboutus/blog/measuring-the-impact-of-financialinstitution-overdraft-programs-on-consumers/. 

66See CFPB October 2023 Data Spotlight. 

67See generally Overdraft and NSF Report. 

68 87 FR 5801 (Feb. 2, 2022). 

69See, e.g., Consumer Fin. Prot. Bureau, 

Consumer Complaint 3745300, https://

www.consumerfinance.gov/data-research/ 

consumer-complaints/search/detail/3745300. 

from the same unpaid transaction 

results in heightened unfairness and 

other risks.53 In 2019, the National 

Credit Union Administration (NCUA) 

issued a rule prohibiting Federal credit 

unions from charging overdraft or NSF 

fees related to certain types of loan 

payments drawn against a borrower’s 

account.54

The CFPB has observed recent 

significant reductions in NSF fees, at 

least in part due to these actions. The 

CFPB has found that banks’ overdraft/ 

NSF fee revenue declined significantly 

compared to pre-pandemic levels 

(predominantly due to changes in bank 

policies),55 and nearly two-thirds (65 

percent) of banks with over $10 billion 

in assets have eliminated NSF fees, 

representing an estimated 97 percent of 

annual NSF fee revenue earned by those 

institutions.56 However, 80 percent of 

credit unions with over $10 billion in 

assets still charge NSF fees.57

II. Stakeholder Outreach and 

Consultation 

The CFPB has engaged in outreach 

and research related to overdraft and 

NSF fees since soon after the CFPB’s 

inception. In 2012, the CFPB initiated a 

broad inquiry into overdraft programs 

for consumer checking accounts.58 This 

inquiry included issuance of an RFI on 

the impacts of overdraft-related fees, 

including NSF fees, on consumers 59

and collection and analysis of overdraftrelated data from several large banks 

over $10 billion in assets that provided 

a significant portion of all U.S. 

consumer checking accounts.60 The 

CFPB published analyses of these data 

in a series of reports from 2013–2017, 

which examined institution-level 

policies and data, as well as accountand transaction-level data.61 These 

studies assessed, among other things, 

overdraft and NSF fee size, incidence, 

and related account closure; overdraftrelated policies and practices across 

institutions; the distribution of overdraft 

and NSF fee incurrence across accounts; 

and the characteristics of account 

holders across distributions of overdraft 

frequency. The CFPB also collected 

anonymized institution-level 

information from several core 

processors, which provide operations 

and accounting systems to financial 

institutions. This data collection 

informed the CFPB’s 2021 report 

assessing overdraft and NSF policies 

and practices among a large sample of 

financial institutions using core 

processors.62

In 2021, the CFPB examined financial 

institutions’ reliance on overdraft/NSF 

fees from 2015 to 2019, finding that it 

was persistent.63 Since then, the CFPB 

has continued tracking overdraft and 

NSF trends in the marketplace 64 and 

evaluating some banks’ key overdraftrelated metrics through the CFPB’s 

supervision work.65 From April 2023 to 

August 2023, the CFPB reviewed the 

publicly available overdraft and NSF 

practices of financial institutions with 

assets over $10 billion.66 In addition, 

the CFPB has recently collected 

information from several financial 

institutions under the CFPB’s 

supervision regarding their overdraftrelated practices.67

In 2022, CFPB issued an RFI regarding 

fees that are not subject to competitive 

processes that ensure fair pricing, which 

received over 80,000 comments.68

Overdraft-related fees were by far the 

most common issue raised in the 

comments. Many consumers expressed 

concerns that the fees were charged for 

reasons that were unclear, 

disproportionate compared to the 

incidents resulting in the fees, and 

difficult or impossible to avoid. 

Consumers also reported that they were 

being charged fees that they believed 

were excessive, they appeared surprised 

by the fees, and they evidenced 

confusion about whether they were 

being charged an overdraft or NSF fee. 

Through market monitoring 

engagement with credit union and State 

bank associations, the CFPB has 

received feedback pertaining to NSF and 

overdraft practices. Some banks and 

credit unions stated that many 

consumers place value on the short-term 

liquidity provided by overdraft services, 

while other institutions claimed that 

these types of fees are important for 

funding other services and programs 

offered to customers, such as financial 

literacy programs. Federal and State 

depository trade associations also have 

critiqued the characterization of their 

members’ fees as so-called ‘‘junk fees’’ 

and urged the CFPB to study consumer 

preferences before taking further action. 

The CFPB also gathers information on 

NSF and other bank fees from its 

Consumer Complaint Database. 

Consumers who submit complaints 

sometimes do not appear to understand 

the difference between NSF and 

overdraft fees. The complaints strongly 

suggest that consumers are often 

confused about why they were charged 

NSF fees when they declined overdraft 

protection and some consumers 

complain that their bank’s transaction 

posting order led to fees that should not 

have been charged. Consumers also 

expressed frustration at not being able to 

track their account balance accurately. 

For example, consumer complainants 

frequently express the belief that 

deposited funds would be available, but 

an extended hold placed on the deposit 

led to overdraft or NSF fees.69

As discussed in connection with 

section 1022(b)(2) of the Consumer 

Financial Protection Act (CFPA) below, 

the CFPB’s outreach included 

consultation with other Federal 

consumer protection and prudential 

regulators. The CFPB has provided other 

regulators with information about the 

proposal, and received feedback that has 

assisted the CFPB in preparing this 

proposal. The CFPB’s outreach also 

included State Attorneys General, Tribal 


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70CFPA section 1031(b), 124 Stat. 2005–2006 (12 

U.S.C. 5531(b)). 

71 Id. 

72 12 U.S.C. 5531(d). For a more detailed 

discussion of the CFPB’s authority under the 

abusive conduct prohibition, see Statement of 

Policy Regarding Prohibition on Abusive Acts or 

Practices, 88 FR 21883 (Apr. 12, 2023) (Abusive 

Policy Statement). 

73See, e.g., S. Rept. No. 111–176, at 172 (2010) 

(‘‘Current law prohibits unfair or deceptive acts or 

practices. The addition of ‘abusive’ will ensure that 

the [CFPB] is empowered to cover practices where 

providers unreasonably take advantage of 

consumers.’’); Public Law 111–203 pmbl. (listing, in 

the preamble to the CFPA, one of the purposes of 

the CFPA as ‘‘protect[ing] consumers from abusive 

financial services practices’’). 

74The conduct that underlies an abusive conduct 

determination may also be found to be unfair or 

deceptive, depending on the circumstances. 75 12 U.S.C. 5512(b)(1). 76 12 U.S.C. 5481(14). 77 12 U.S.C. 5512(b)(2). 

78 12 CFR 1005.2(b)(1). 

79 12 CFR 1005.2(b)(3). 

80 12 CFR 1005.2(b)(2). 

81 12 CFR 1005.2(b)(1). 

82See Comment 2(b)(2)–2; Comment 2(b)–2.i. 

83Comment 2(b)–2.ii. 

84Comment 2(b)–2.iii; for a general discussion of 

the ‘‘account’’ definition, see Consumer Fin. Prot. 

Bureau, Interagency Consumer Laws and 

Regulations—Electronic Fund Transfer Act, at 5 

(Mar. 2019), https://files.consumerfinance.gov/f/ 

documents/cfpb_supervision-and-examinationmanual_efta-exam-procedures-incl-remittances_

2019-03.pdf. 

85 12 CFR 1005.2(i); 12 U.S.C. 5519; Public Law 

111–203, 124 Stat. 1376, 2005 (2010). 

86 12 CFR 1005.2(a). 

87 12 CFR 1005.2(g), 1005.3. 

Attorneys General, State financial 

regulators, and organizations 

representing the officials charged with 

enforcing applicable Federal, State, and 

local laws. 

III. Legal Authority 

Consumer Financial Protection Act 

Section 1031 

Section 1031(b) of the CFPA provides 

the CFPB with the authority to 

‘‘prescribe rules applicable to a covered 

person or service provider identifying as 

unlawful unfair, deceptive, or abusive 

acts or practices in connection with any 

transaction with a consumer for a 

consumer financial product or service, 

or the offering of a consumer financial 

product or service.’’ 70 CFPA section 

1031(b) further provides that rules 

under section 1031 may include 

requirements for the purpose of 

preventing such acts or practices.71

Under CFPA section 1031(d), the 

CFPB ‘‘shall have no authority . . . to 

declare an act or practice abusive in 

connection with the provision of a 

consumer financial product or service’’ 

unless the act or practice meets at least 

one of several enumerated conditions.72

CFPA section 1031(d)(2) provides, in 

pertinent part, that an act or practice is 

abusive when it takes unreasonable 

advantage of a consumer’s lack of 

understanding of the material risks, 

costs, or conditions of the product or 

service. 

Congress intended the statutory 

phrase ‘‘abusive acts or practices’’ to 

encompass conduct by covered persons 

that is beyond what would be 

prohibited as unfair or deceptive acts or 

practices.73 Unlike unfairness, but 

similar to deception, a finding of 

abusive conduct requires no showing of 

substantial injury to establish liability. 

Rather, it is focused on conduct that 

Congress presumed to be harmful or 

distortionary to the proper functioning 

of the market. An act or practice need 

fall into only one of the enumerated 

conditions under CFPA section 1031(d) 

to be abusive, but an act or practice 

could satisfy more than one condition.74

Consumer Financial Protection Act 

Section 1022(b)(1) 

Section 1022(b)(1) of the CFPA 

provides that the CFPB’s Director ‘‘may 

prescribe rules and issue orders and 

guidance, as may be necessary or 

appropriate to enable the CFPB to 

administer and carry out the purposes 

and objectives of the Federal consumer 

financial laws, and to prevent evasions 

thereof.’’ 75 The term ‘‘Federal consumer 

financial law’’ includes rules prescribed 

under title X of the CFPA, which 

include rules prescribed under section 

1031.76

Section 1022(b)(2) of the CFPA 

prescribes certain standards for 

rulemaking that the CFPB must follow 

in exercising its authority under CFPA 

section 1022(b)(1).77 See part VI for a 

discussion of the CFPB’s standards for 

rulemaking under CFPA section 

1022(b)(2). 

IV. Discussion of the Proposed Rule 

Definitions (§ 1042.2) 

2(a) Account 

Proposed § 1042.2(a) provides that 

‘‘account’’ has the same meaning as the 

term in Regulation E, 12 CFR 1005.2(b). 

Pursuant to that definition, an account 

would include the following: (1) a 

checking, savings, or other consumer 

asset account held by a financial 

institution (directly or indirectly), 

including certain club accounts, 

established primarily for personal, 

family, or household purposes,78 and (2) 

a prepaid account, as defined in 12 CFR 

1005.2(b)(3).79 An account would not 

include, for example: (1) an account 

held by a financial institution under a 

bona fide trust agreement; 80 (2) an 

occasional or incidental credit balance 

in a credit plan; 81 (3) profit-sharing and 

pension accounts established under a 

bona fide trust agreement; 82 (4) escrow 

accounts such as for payments of real 

estate taxes, insurance premiums, or 

completion of repairs or 

improvements; 83 or (5) accounts for 

purchasing U.S. savings bonds.84

The CFPB preliminarily concludes 

that referencing this existing definition 

of account for purposes of this proposal 

would help to foster consistency with 

Regulation E and would provide a 

familiar regulatory definition that has 

already been successfully implemented 

by many covered financial institutions. 

This definition would also capture a 

broad range of consumer account types 

to maximize the number of consumers 

protected from the preliminarily 

identified abusive practice. The CFPB 

seeks comment on its proposed 

approach to this definition. 

2(b) Covered Financial Institution 

Proposed § 1042.2(b) provides that 

‘‘covered financial institution’’ means a 

‘‘financial institution’’ as defined in 

Regulation E, 12 CFR 1005.2(i). 

Applying that definition, a ‘‘covered 

financial institution’’ would mean a 

bank, savings association, credit union, 

or any other person that directly or 

indirectly holds an account belonging to 

a consumer, or that issues an access 

device and agrees with a consumer to 

provide electronic fund transfer 

services. A covered financial institution 

would not include a motor vehicle 

dealer, as defined in CFPA section 

1029(f)(2), that is predominantly 

engaged in the sale and servicing of 

motor vehicles, the leasing and 

servicing of motor vehicles, or both.85

Adopting this definition would also 

incorporate related definitions and 

commentary, such as those for ‘‘access 

device’’ 86 and ‘‘electronic funds 

transfer.’’ 87

The CFPB preliminarily concludes 

that referencing this existing definition 

of account for purposes of this proposal 

would help to foster consistency with 

Regulation E and would provide a 

familiar regulatory definition that has 

already been successfully implemented 

by many covered financial institutions. 

This definition would also capture a 

broad range of financial institutions to 

ensure an equal playing field. The CFPB 

seeks comment on its proposed 

approach to this definition. 

2(c) Covered Transaction 

Proposed § 1042.2(c) provides that 

‘‘covered transaction’’ means an attempt 

by a consumer to withdraw, debit, pay, 


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88 76 FR 43394, 43400 (July 20, 2011). 

89Off. of the Comptroller of the Currency, I 

deposited a check. When will my funds be 

available/released from the hold?, 

HelpWithMyBank.gov, https:// 

www.helpwithmybank.gov/help-topics/bankaccounts/funds-availability/funds-availabilitycheck.html (last visited Jan. 17, 2024). 

90Nacha, The ABCs of ACH, https://

www.nacha.org/content/abcs-ach (last visited Jan. 

17, 2024). 

91See 12 CFR 1005.17(b). 

92This instantaneous (or near-instantaneous) 

authorization or declination occurs with debit card 

transactions that are ‘‘single message’’ (where the 

authorization request and the settlement request are 

sent in the same transmission at the same time) as 

well as ‘‘dual message’’ (where the first 

transmission requests authorization and the second 

transmission requests settlement)—in both cases, 

the authorization request is processed in real time. 

93 76 FR 43394, 43408 (July 20, 2011). 

94When a P2P transaction is processed as an ACH 

debit, the funds are often made immediately 

available to the recipient, but the sender may not 

instantly see the funds withdrawn from their linked 

account, as the sender’s account-holding institution 

may take several days to settle the payment. In 

contrast, when a P2P transaction is processed as a 

credit card or debit card transaction, the funds are 

often made immediately available to the recipient 

and the sender may instantly see the funds 

withdrawn from their linked account, as the 

sender’s account-holding institution authorizes and 

settles the transaction instantaneously or nearinstantaneously. 

95While some P2P providers merely facilitate 

transactions between linked deposit accounts, 

others allow users to hold funds within their P2P 

provider account. These providers automatically 

place funds received into the stored value account, 

and the consumer can transfer the funds into a 

linked deposit account or send the funds in a future 

P2P transaction. Attempts to send funds to another 

person from a stored value account may be declined 

instantaneously or near-instantaneously. In 

contrast, transfers from a stored value account to a 

linked deposit account that does not involve a debit 

card are typically ACH transactions taking between 

one and three business days, although some 

providers may offer an instantaneous or nearinstantaneous transfer on those transactions (often 

for a fee). See Kate Rooney, PayPal users can now 

transfer funds instantly to their bank accounts, 

CNBC (Mar. 12, 2019), https://www.cnbc.com/2019/ 

03/12/venmo-users-can-now-transfer-fundsinstantly-to-their-bank-accounts.html. P2P 

transactions are continuing to increase in speed due 

to technology and payment network infrastructure 

advances, including, recently, the launch of the 

FedNow Service. See U.S. Dep’t of Treas., The 

Future of Money and Payments, at 30–31 (Sept. 

2022), https://home.treasury.gov/system/files/136/ 

Future-of-Money-and-Payments.pdf; Fed Rsrv. Bank 

Servs., Instant payments could help financial 

institutions capture a piece of the P2P pie, 

FRBservices.org, https://www.frbservices.org/ 

financial-services/fednow/instant-paymentseducation/instant-payments-could-help-fi-capturep2p.html. 

96 ‘‘Returned item’’ NSF fees are charged to the 

consumer’s account when dishonoring or returning 

checks or other items that are drawn on the 

consumer’s account due to insufficient funds. These 

fees are distinct from ‘‘returned deposited item 

fees’’ that are imposed when items deposited by the 

consumer are returned due to insufficient funds in 

the check originator’s account. See 12 CFR 

1030.11(a)(1); Comment 11(a)(1)–2. This proposal 

does not address whether returned deposited item 

fees are an abusive practice. The CFPB’s ‘‘Bulletin 

2022–06: Unfair Returned Deposited Item Fee 

Assessment Practices’’ addressed potential 

unfairness concerns with returned deposited item 

fees. See 87 FR 66940 (Nov. 7, 2022). 

or transfer funds from their account that 

is declined instantaneously or nearinstantaneously by a covered financial 

institution due to insufficient funds. A 

declination occurs instantaneously or 

near-instantaneously when the 

transaction is processed in real time and 

there is no significant perceptible delay 

to the consumer when attempting the 

transaction. While consumers may 

attempt to withdraw, debit, pay, or 

transfer funds from their account in a 

variety of different ways, including by 

check, ACH, person-to-person (P2P) 

transaction, or debit card, this proposed 

definition would only cover 

transactions that are instantaneously or 

near-instantaneously declined due to 

insufficient funds. Transactions 

declined or rejected due to insufficient 

funds hours or days after the consumer’s 

attempt would not be covered by the 

proposal. Transactions authorized in the 

first instance, even if they are later 

rejected or fail to settle due to 

insufficient funds, also would not be 

covered by the proposal. 

Based on this proposed definition, 

checks and ACH transactions would not 

be covered, assuming these payment 

mechanisms do not evolve in such a 

way that they are able to be declined 

instantaneously or near-instantaneously. 

Generally, a check is physically 

accepted by the merchant or payee, 

without payment authorization or 

guarantee, and is deposited in its bank 

and sent through the check clearing 

process to the payor’s bank.88 Checks 

usually clear within one or two business 

days.89 Similarly, ACH transactions 

generally are not processed in real 

time—they are typically processed in 

batches several times a day when the 

applicable ACH operator (the Federal 

Reserve Bank or the Electronic 

Payments Network) is open for 

business.90

Based on this proposed definition, 

one-time debit card transactions that are 

not pre-authorized, ATM transactions, 

and certain P2P transactions would be 

covered by the proposal, assuming these 

payment mechanisms continue to be 

declined instantaneously or nearinstantaneously. ATM and one-time 

debit card transactions that are subject 

to the requirements of Regulation E’s 

opt-in requirements 91 are authorized 

instantaneously or near-instantaneously, 

and in the event of insufficient funds, 

are declined instantaneously or nearinstantaneously.92 Some debit card 

transactions are not authorized in real 

time—for example, decoupled debit 

card transactions are typically processed 

as ACH debits,93 and most recurring 

debit card transactions are authorized in 

advance. Some P2P transactions are 

authorized in real time and may be 

declined instantaneously or nearinstantaneously, whereas others are 

processed as ACH debits.94 The 

applicability of the proposal to P2P 

transactions may also depend in part on 

whether the P2P provider offers a stored 

value account for funds or links to a 

deposit account, and on the evolution of 

P2P transaction mechanisms more 

generally.95

The CFPB solicits comment on the 

proposed definition of covered 

transaction, including whether: (1) the 

timing component is sufficiently clear to 

determine coverage; (2) the proposed 

definition appropriately accounts for 

emerging payment networks and 

technology innovations; and (3) the 

proposed definition captures the scope 

of relevant transactions where potential 

abusive practices are occurring in the 

market or are at risk of occurring in the 

future. 

2(d) Insufficient Funds 

Proposed § 1042.2(d) provides that 

‘‘insufficient funds’’ refers to the status 

of an account that does not have enough 

money to cover a withdrawal, debit, 

payment, or transfer transaction. The 

CFPB preliminarily concludes that 

including this definition would 

streamline the rule by avoiding circular 

definitions. The CFPB seeks comment 

on its proposed approach to this 

definition. 

2(e) Nonsufficient Funds Fee or NSF 

Fee 

Proposed § 1042.2(e) provides that 

‘‘nonsufficient funds fee or NSF fee’’ 

means a charge that is assessed by a 

covered financial institution for 

declining an attempt by a consumer to 

withdraw, debit, pay, or transfer funds 

from their account due to insufficient 

funds. This proposed definition also 

would clarify that the name used by the 

financial institution for a fee is not 

determinative of whether it is 

considered a ‘‘nonsufficient funds fee.’’ 

Unlike overdraft fees, which can also 

be charged in the event of insufficient 

funds, NSF fees as defined herein are 

only charged after a declined 

transaction. As a result, such fees may 

sometimes be referred to as 

‘‘declination’’ fees or ‘‘bounced check’’ 

fees. The CFPB has also observed such 

fees labeled as, for example, ‘‘returned 

item fees,’’ 96 ‘‘returned payment fees,’’ 

‘‘uncollected funds fees,’’ ‘‘overdraft— 

unpaid fees,’’ and ‘‘shortage of funds 


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97 12 U.S.C. 5531(d)(2)(A). 

98The CFPB and other regulators have taken 

action in other ways to address harms from NSF 

fees that are prevalent in today’s market. Some of 

those actions are described elsewhere in this 

proposal’s preamble. Along those lines, the CFPB 

notes that the CFPB’s proposal addressing overdraft 

fees (Overdraft Proposed Rule), which was released 

recently, would amend Regulation Z such that, 

going forward, § 1026.52(b) would apply to openend covered overdraft credit that can be accessed 

by a hybrid debit-credit card. In doing so, the 

Overdraft Proposed Rule would prohibit any fee 

imposed with respect to most potentially 

overdrawing transactions that a card issuer declines 

to authorize, including certain declined debit card 

transactions and declined ACH transactions. Thus, 

the Overdraft Proposed Rule, if finalized, would 

prohibit certain NSF fees charged in today’s market 

under the CFPB’s TILA authority, but it generally 

would not prohibit the NSF fees that this proposal, 

if finalized, would prohibit. 

99See 12 U.S.C. 5511(b) (CFPB’s statutory 

objective under the CFPA of ‘‘ensuring that . . . 

consumers are protected from unfair, deceptive, or 

abusive acts and practices and from 

discrimination’’). See also Nasdaq Stock Mkt. LLC 

v. SEC, 38 F.4th 1126 (D.C. Cir. 2022) (‘‘[A]n agency 

has the latitude to ‘adopt prophylactic rules to 

prevent potential problems before they arise’—that 

is, ‘[a]n agency need not suffer the flood before 

building the levee.’ ’’) (quoting Stilwell v. Off. of 

Thrift Supervision, 569 F.3d 514, 519 (D.C. Cir. 

2009)). 

100See Consumer Fin. Prot. Bureau, Overdraft 

Lending: Very Large Financial Institutions, 

Proposed Rule (released Jan. 17, 2024), https://files.

consumerfinance.gov/f/documents/cfpb_overdraftcredit-very-large-financial-institutions_proposedrule_2024-01.pdf. 

101As described in the Background discussion 

above, P2P transaction platforms are a fast-growing 

segment of the market, and this trend is only 

expected to accelerate over the next few years, so 

the CFPB proposes to forestall the imposition of 

such fees in that market segment. 

102 If covered financial institutions began 

assessing NSF fees on covered transactions in the 

future, it is theoretically possible for consumer 

understanding of the financial institutions’ 

practices to improve due to other factors. For 

example, some consumers who do not anticipate an 

initial NSF fee may be less surprised after incurring 

multiple NSF fees. However, as with a disclosure, 

such improved understanding would only reduce, 

and not eliminate, the incidence of the abusive 

practice. Such a development also would likely 

only improve understanding of financial 

institutions’ practices, not understanding of the 

consumer’s account balance at the time the covered 

transaction is initiated (see discussion below 

regarding ‘‘risks, costs, or conditions’’). 

103 85 FR 44382, 44421 (July 22, 2020) (internal 

quotations omitted) (citing 82 FR 54472, 54617 

(Nov. 17, 2017)). 

104 Id. at 44382. 

fees.’’ This proposed definition broadly 

includes the types of fees that, if 

charged, would in substance constitute 

an abusive practice, regardless of how 

the fees are labeled. The CFPB seeks 

comment on its proposed approach to 

this definition. The CFPB also solicits 

comments on its examples of fee labels. 

Abusive Conduct/Lack of 

Understanding (§§ 1042.2 and 1042.3) 

The CFPB’s preliminary findings 

regarding covered financial institutions’ 

abusive charging of NSF fees in 

connection with covered transactions 

are discussed below. The CFPB is 

making these preliminary findings 

based on the evidence discussed in the 

abusive conduct analysis below and in 

the section-by-section analysis and 

Background discussion above. 

Under CFPA section 1031(d)(2)(A), 

the CFPB may declare an act or practice 

to be abusive in connection with the 

provision of a consumer financial 

product or service if the act or practice 

takes unreasonable advantage of a lack 

of understanding on the part of the 

consumer of the material risks, costs, or 

conditions of the product or service.97

The CFPB is preliminarily determining 

that charging an NSF fee in connection 

with a covered transaction would take 

unreasonable advantage of consumers’ 

lack understanding of the material risks, 

costs, or conditions associated with 

their deposit accounts, and thus would 

be abusive. 

The CFPB understands, based on its 

market monitoring, that currently 

covered financial institutions rarely 

charge NSF fees on covered 

transactions.98 The CFPB is proposing 

this rule primarily as a preventive 

measure.99 Financial institutions have 

ongoing incentives to generate revenue, 

and NSF fees may become increasingly 

appealing as a revenue source in the 

absence of this proposal. For example, 

if the recently released Overdraft 

Proposed Rule 100 is finalized and curbs 

overdraft fee revenue, institutions might 

have an incentive to impose new fees. 

This proposal, if finalized, would 

prevent the imposition of NSF fees in 

various contexts where they might 

foreseeably arise, such as declines of 

ATM, debit card, and P2P 

transactions.101 Thus, the CFPB is 

proposing to preempt imposition of new 

fees that would harm consumers in the 

future. 

The CFPB considered whether a 

disclosure remedy to the preliminarily 

identified abusive practice would be 

sufficient, and has preliminarily 

determined that although such a remedy 

might reduce the incidence of the 

abusive conduct, it would not eliminate 

it and would likely be too costly or not 

feasible in many or most situations. 

Theoretically, a financial institution 

could present a disclosure when the 

transaction is attempted, explaining that 

the transaction would be declined and 

a fee would be charged. However, the 

CFPB is skeptical that such a disclosure 

would be feasible because the financial 

institution is often not the party 

operating the point-of-sale terminal, 

ATM machine, or P2P application 

interface. If it were feasible, it would 

likely be costly to present individual 

disclosures for each such transaction 

and implement such disclosures across 

many different payment channels and 

consumer interfaces. And a disclosure 

of that nature would not eliminate the 

incidence of the abusive practice 

because there would still be consumers 

who may not understand even a wellcrafted disclosure.102

The CFPB seeks comment on whether 

the practices identified in this proposal 

are broad enough to address the 

potential consumer harms and if the 

description of the preliminarily 

identified abusive practice should be 

revised in any way, and requests any 

relevant additional data that should be 

considered. 

Approaches to Abusive Conduct 

Prohibition in Prior CFPB Rulemakings 

Before describing the reasoning 

behind the CFPB’s preliminary 

conclusion that it would be an abusive 

practice for covered financial 

institutions to charge NSF fees on 

covered transactions, the CFPB first 

discusses the approach taken to assess 

abusive practices in prior rulemakings. 

Under CFPA section 1031(d)(2)(A), an 

act or practice can be abusive if covered 

parties take unreasonable advantage of 

the ‘‘lack of understanding on the part 

of consumers of the material costs, risks, 

or conditions of the product or service.’’ 

The CFPB’s 2017 rulemaking on Payday, 

Vehicle Title, and Certain High-Cost 

Installment Loans (2017 rule) stated that 

consumers lack understanding in the 

context of obtaining certain types of 

small-dollar loans ‘‘if they fail to 

understand either their personal 

likelihood of being exposed to the risks 

of the product or service in question or 

the severity of the kinds of costs and 

harms that may occur.’’ 103 This 

conclusion was part of the 2017 rule’s 

larger set of findings that a lender’s 

failure to determine whether a 

consumer had the ability to repay a 

covered loan was abusive and unfair. In 

a separate 2020 rulemaking, the CFPB 

rescinded certain provisions of the 2017 

rule’s UDAAP findings as well as the 

2017 rule’s mandatory underwriting 

provisions (2020 rule).104

In explaining the rationales for 

rescission, the 2020 rule’s preamble 

included certain statements about the 

abusive conduct prohibition. However, 

these rationales were specific to and 

inextricably intertwined with the 

evidentiary record and financial 

products at issue in the 2017 rule. 

Accordingly, the 2020 rule’s discussion 

of the abusive conduct prohibition was 


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105For example, both the ‘‘Legal’’ and 

‘‘Reconsidering the Evidence’’ subsections of the 

2020 rule’s lack-of-understanding analysis rely 

heavily on the conclusion that a study of payday 

borrowers’ ability to predict future time in debt by 

Professor Ronald Mann was insufficient to 

underpin the 2017 rule’s lack-of-understanding 

findings. See id. at 44422 (describing how 

‘‘[a]lthough the [2017 rule] concluded that a 

significant population of consumers do not 

understand the material risks and costs of covered 

loans, the [2017 rule] extrapolated or inferred this 

conclusion from the [CFPB]’s interpretation of 

limited data from the Mann study . . . [t]he limited 

data from the Mann study does not address whether 

consumers lack understanding of the material costs, 

risks, or conditions of covered loans’’), and id. at 

44423 (stating, in reiterating the language from the 

proposed rule preceding the 2020 rule (2019 

proposal), that ‘‘the Mann study was not 

sufficiently robust and reliable in light of’’ the 2017 

rule’s anticipated impacts on the market and how 

the Mann study was the ‘‘linchpin’’ of the 2017 

rule’s lack-of-understanding finding). 

106As the Abusive Policy Statement described, 

certain ‘‘gaps in understanding’’ between a 

consumer and an entity can ‘‘create circumstances 

where transactions are exploitative.’’ See Abusive 

Policy Statement at 21886–87. 

107 85 FR 44382, 44415 n.286 (July 22, 2020). 

108 Id. 

109 Id. 

110 85 FR 44382, 44422 (July 22, 2020). 

111 Id. at 44394. 

112 Id. at 44422. 

113Compare 12 U.S.C. 5531(c)(1)(A), with 12 

U.S.C. 5531(d)(2)(A). 

114Section 1031(d)(2)(A) refers to ‘‘lack of 

understanding’’ without a qualifier, whereas other 

UDAAP authority provisions in section 1031 

expressly include a reasonableness qualifier. 

Compare 12 U.S.C. 5531(d)(2)(A), with 12 U.S.C. 

5531(d)(2)(C) (making reference to ‘‘reasonable’’ 

reliance’’), and 12 U.S.C. 5531(c)(1)(A) (for 

purposes of the unfairness test, substantial injury 

must not be ‘‘reasonably’’ avoidable). See also DHS 

v. MacLean, 574 U.S. 383, 392 (2015) (describing 

how ‘‘Congress generally acts intentionally when it 

uses particular language in one section of a statute 

but omits it in another’’ and the ‘‘interpretive canon 

that Congress acts intentionally when it omits 

language included elsewhere applies with 

particular force’’ where the phrases being compared 

are in close proximity). 

115 85 FR 44382, 44422–23 (July 22, 2020). The 

2020 rule merely repeated the 2019 proposal’s 

language that ‘‘unlike the elements of unfairness 

. . . the elements of [the abusive conduct 

prohibition] do not have a long history or governing 

precedents. Rather, the CFPA marked the first time 

that Congress defined ‘abusive acts or practices’ as 

generally unlawful in the consumer financial 

services sphere.’’ Id. at 44421–22. The 2020 rule 

then stated that, ‘‘[f]or the same reasons that . . . 

there was an insufficient basis to support the 2017 

[rule’s] finding that substantial injury from the 

identified practice was not reasonably avoidable 

. . . there is an insufficient basis to conclude that 

consumers lack understanding of the material risks, 

costs or conditions.’’ Id. at 44422. 

116See generally Abusive Policy Statement 

(discussing background and legislative history 

regarding CFPB’s authority to address abusive 

conduct); see also 86 FR 14808, 14809 (Mar. 19, 

2021) (in rescinding an earlier policy statement 

issued by the CFPB in 2020 on the abusive conduct 

prohibition, CFPB reasoned, in part, that 

‘‘[d]eclining to apply the full scope of the statutory 

standard pursuant to the policy has a negative effect 

on the [CFPB’s] ability to achieve its statutory 

objective of protecting consumers from abusive 

practices’’). 

117As the Abusive Policy Statement noted, in 

2007, then-FDIC Chairwoman Sheila Bair explained 

in congressional testimony that unfairness ‘‘can be 

a restrictive legal standard’’ and proposed that 

Congress consider ‘‘adding the term ‘abusive,’ ’’ 

which she noted existed in the Home Ownership 

and Equity Protection Act, and which ‘‘is a more 

flexible standard to address some of the practices 

that make us all uncomfortable.’’ Improving Federal 

Consumer Protection in Financial Services: Hearing 

Before the H. Comm. on Fin. Servs., 110th Cong. 40 

(2007) (statement of Hon. Sheila C. Bair, Chairman 

of the Federal Deposit Insurance Corporation), 

https://www.govinfo.gov/content/pkg/CHRG110hhrg37556/html/CHRG-110hhrg37556.htm. 

likewise limited and did not address 

facts and circumstances other than those 

at issue in the 2020 rule (which, again, 

was inextricably linked to the 2017 

rule’s evidentiary record and product 

coverage).105 The 2020 rule does not, for 

example, address factual situations 

where a lender exploits an information 

asymmetry between a lender and a 

consumer about the level of risk posed 

to the consumer by the product or 

service.106

Thus, as a general matter, the 

preamble in the 2020 rule does not 

constrain the CFPB’s authority to 

enforce, supervise, or regulate under the 

full scope of the CFPA’s abusive 

conduct prohibition in other rules or in 

individual supervisory or enforcement 

matters. As the 2020 rule’s preamble 

itself explained, the 2020 rule 

‘‘addresses the legal and evidentiary 

bases for particular rule provisions 

identified in [the 2020] rule. It does not 

prevent the [CFPB] from exercising tool 

choices, such as appropriate exercise of 

supervision and enforcement tools, 

consistent with the [CFPA] and other 

applicable laws and regulations.’’ 107

The 2020 rule also explained that it 

‘‘does not prevent the [CFPB] from 

exercising its judgment in light of 

factual, legal, and policy factors in 

particular circumstances as to whether 

an act or practice meets the standards 

for abusiveness under section 1031 of 

the [CFPA].’’ 108

Nevertheless, out of an abundance of 

caution and to correct any possible 

misimpressions that the 2020 rule’s 

preamble set forth interpretive limits on 

the CFPB’s authority under the abusive 

conduct prohibition that the agency 

must follow in other contexts, the CFPB 

hereby proposes to clarify the 

interpretation of the abusive conduct 

prohibition in the context of the 2020 

rule, consistent with the analysis below. 

The CFPB also requests comment on 

whether there are other aspects of the 

2020 rule’s discussion of the abusive 

and unfair conduct prohibitions that 

warrant clarification. 

Conflation of lack-of-understanding 

and reasonable-avoidability standards. 

The 2020 rule stated that the 2017 rule’s 

lack-of-understanding standard was 

‘‘problematic’’ and ‘‘too broad,’’ 109 and 

instead ‘‘should be treated as similar’’ to 

the reasonable-avoidability element of 

unfairness.110 The 2020 rule stated that, 

for purposes of unfairness, consumers 

could reasonably avoid injury if they 

‘‘have an understanding . . . sufficient 

for them to anticipate [the] harms and 

understand the necessity of taking 

reasonable steps to prevent resulting 

injury.’’ 111 It used a nearly identical 

approach to lack of understanding, 

stating that consumers have a sufficient 

understanding under section 

1031(d)(2)(A) if their understanding is 

‘‘sufficient . . . to anticipate [the] harm 

and understand the necessity of taking 

reasonable steps to prevent resulting 

injury.’’ 112

These preamble statements reflect an 

overly narrow application of the 

statutory text for lack of understanding. 

With respect to the abusive conduct 

prohibition generally, it is worth noting 

that, unlike the CFPA’s unfairness 

provision, the statutory text for the 

abusive conduct prohibition does not 

require any inquiry into reasonable 

avoidability.113 Although the CFPB 

preliminarily finds that consumers’ lack 

of understanding that they would be 

charged an NSF fee for covered 

transactions is generally reasonable, as 

discussed below, the statute does not 

require that the lack of understanding 

was reasonable to demonstrate abusive 

conduct.114 The 2020 rule also did not 

specify why, in spite of the differences 

between the standards, it was 

‘‘appropriate’’ to treat reasonable 

avoidability and lack of understanding 

as ‘‘similar but distinct.’’ 115

Conflating the two standards in this 

manner contravenes the context and 

purpose of the abusive conduct 

prohibition and the statutory text. 

Congress passed the prohibition after 

the 2008 mortgage crisis, recognizing 

that the unfairness and deception 

prohibitions were insufficient to prevent 

predatory mortgage lending.116 The 

abusive conduct prohibition was 

explicitly added as a new standard of 

fair dealing, and clearly was not 

intended to simply mirror unfairness.117

Moreover, although a consumer’s lack of 

understanding might, depending on the 

facts, contribute to a consumer being 

unable to reasonably avoid substantial 

injury, nothing in CFPA section 

1031(d)(2)(A)’s text supports 

interpreting the provision to track the 

reasonable-avoidability standard. 

Rather, under the statute the inquiry is 

whether the consumers at issue lack 

understanding of the risks, costs, or 

conditions of a product or service and 


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118The Abusive Policy Statement noted that 

although establishing that a reasonable consumer 

would lack understanding of the material risks, 

costs, or conditions of a product or service is not 

a prerequisite to establishing liability under CFPA 

section 1031(d)(2)(A), government enforcers or 

supervisory agencies may rely on the fact that a 

reasonable consumer would lack such 

understanding to establish that consumers did not 

have such understanding. See Abusive Policy 

Statement at 21887 n.55. 

119For example, as noted above the 2020 rule 

acknowledged that the reasonable-avoidability and 

lack-of-understanding standards were ‘‘similar but 

distinct.’’ 85 FR 44382, 44423 (July 22, 2020). It also 

acknowledged that the reasonable-avoidability 

standard ‘‘has a ‘means to avoid’ requirement that 

is absent from the abusiveness standard,’’ and 

‘‘abusiveness could prohibit some conduct that 

unfairness would permit.’’ Id. And it stated that 

‘‘[t]he [CFPB] believes that Congress intended for 

the statutory phrase ‘abusive acts or practices’ to 

encompass conduct by covered persons that is 

beyond what would be prohibited as unfair or 

deceptive . . . although such conduct could 

overlap and thus satisfy the elements for more than 

one of the standards.’’ Id. at 44416. 

120 Id. at 44422. The 2020 rule went on to explain 

that ‘‘sufficient understanding’’ as applied in the 

context of the 2017 rule meant that consumers need 

only ‘‘understand that a significant portion of 

payday borrowers experience difficulty repaying 

and that if such borrowers do not make other 

reasonable arrangements they may either end up in 

extended loan sequences, default, or struggle to pay 

other bills after repaying their payday loan.’’ Id. at 

44395. The 2020 rule elaborated that, ‘‘if consumers 

understand that a significant portion of payday 

borrowers experience adverse outcomes, they grasp 

the likelihood of risk,’’ and that if consumers 

‘‘understand the potential outcomes arising from 

difficulty repaying, they appreciate the magnitude 

of those risks.’’ Id. 

121See Abusive Policy Statement at 21887. 

122 85 FR 44382, 44422 (July 22, 2020). See also 

id. at 44390 (in context of the reasonableavoidability analysis, which the 2020 rule relied on 

for the lack-of-understanding analysis, describing 

the 2017 rule as requiring that consumers have a 

‘‘specific understanding of their individualized risk, 

as determined by their ability to accurately predict 

how long they would be in debt after taking out a 

covered short-term or longer-term balloon-payment 

loan’’). 

123 85 FR 44382, 44390–91 (July 22, 2020). 124 Id. at 44391. 

whether the company took unreasonable 

advantage of that lack of 

understanding—not whether, as noted 

above, the lack of understanding was 

reasonable.118 Lastly, the 2020 rule itself 

in various passages acknowledged these 

textual differences and recognized how 

they lead to different contours of 

authority, which undermines the 2020 

rule’s attempt to tether the two 

standards.119 Accordingly, the CFPB 

proposes to clarify that lack of 

understanding under CFPA section 

1031(d)(2)(A) is not synonymous with 

reasonable avoidability under the 

unfairness standard. 

Magnitude and likelihood of risk of 

harm. The 2020 rule stated that 

consumers have ‘‘sufficient 

understanding’’ of the material costs, 

risks, or conditions of small-dollar loans 

if they understand ‘‘the magnitude and 

likelihood of risk of harm associated 

with the [product or service], as well as 

the necessity of taking reasonable steps 

to prevent resulting injury.’’ 120

‘‘Magnitude and likelihood of risk of 

harm’’ is a reasonable articulation of the 

standard for understanding certain 

‘‘risks’’ that implicate prediction of 

future outcomes, especially in relation 

to loan underwriting. However, that is 

not the full scope of the potential risks 

under CFPA section 1031(d)(2)(A). As 

the CFPB’s Statement of Policy 

Regarding Prohibition on Abusive Acts 

or Practices (Abusive Policy Statement) 

noted, the risks of which a consumer 

lacks understanding ‘‘encompass a wide 

range of potential consumer harms.’’ 121

The CFPB proposes to clarify that the 

2020 rule’s focus on ‘‘magnitude’’ and 

‘‘likelihood’’ of risk of harm was an 

application of what it means under the 

statute to understand ‘‘risks,’’ not 

necessarily ‘‘costs’’ or ‘‘conditions.’’ The 

statutory references to ‘‘costs’’ and 

‘‘conditions’’ are textually disjunctive 

and can be conceptually distinct from 

‘‘risks’’ and from each other. Where 

consumers lack understanding of the 

relevant costs or conditions, the notion 

of ‘‘likelihood and magnitude of harm’’ 

may have no bearing on the lack-ofunderstanding analysis. For example, it 

is enough to show that a company takes 

unreasonable advantage of the fact that 

consumers do not know a fee (‘‘cost’’) 

will be charged in a particular 

circumstance, even if consumers have 

some understanding of the ‘‘risk’’ that a 

fee might sometimes be charged. See 

below for a discussion of what risks, 

costs, and conditions mean in the 

particular context of this proposal. 

Specific vs. general understanding. 

The 2020 rule took issue with the 

conclusion in the 2017 rule that 

consumers in the small-dollar lending 

market lack understanding or cannot 

reasonably avoid harm under the 

unfairness standard if they do not have 

a ‘‘specific understanding of their 

personal risks such that they can 

accurately predict how long they will be 

in debt after taking out’’ a covered 

loan.122 The 2020 rule stated, rather, 

that ‘‘consumers need not have a 

specific understanding of their 

individualized likelihood and 

magnitude of harm such that they could 

accurately predict how long they would 

be in debt after taking out’’ a payday 

loan and that the appropriate analysis 

was whether consumers ‘‘have an 

understanding of the likelihood and 

magnitude of risks of harm associated 

with payday loans sufficient for them to 

anticipate those harms.’’ 123 According 

to the 2020 rule, this means that 

‘‘consumers need only understand that 

a significant portion of payday 

borrowers experience difficulty 

repaying,’’ which the 2020 rule 

described as a ‘‘generalized’’ or 

‘‘general’’ understanding.124 The 2020 

rule applied this distinction between 

‘‘specific’’ and ‘‘general’’ consumer 

understanding both to the lack-ofunderstanding element of the abusive 

conduct prohibition, and to the 

reasonable-avoidability element of 

unfairness. Because the 2020 rule linked 

the unfair and abusive conduct 

prohibitions, the following discussion 

applies to the interpretation of both 

prohibitions. 

The CFPB preliminarily declines to 

characterize consumers’ lack of 

understanding in this proposal as either 

‘‘specific’’ or ‘‘general’’ because that 

binary framework is unhelpful for 

determining whether consumers 

understand the material risks, costs, or 

conditions of a consumer financial 

product or service, which is the 

statutory requirement. A consumer’s 

lack of understanding can be based on 

one or the other, or a mixture of both, 

and each can inform one another. 

Indeed, a person’s understanding of 

their personal risk may be intertwined 

with their understanding of the general 

risk to all consumers—if one knows that 

many are harmed, they are more likely 

to understand that they are likely to be 

harmed. 

Furthermore, to the extent that the 

2020 rule could be misconstrued to 

suggest that analysis of the abusive 

conduct prohibition requires an inquiry 

into a consumer’s so-called general 

understanding of risk, the CFPB is 

clarifying that is a misimpression for the 

reasons described below. Consumers’ 

understanding of risk, and specifically, 

their anticipation of harm can be 

informed by a variety of factors, 

including personal circumstances. As 

noted above, those factors sometimes 

include general perception of risk in the 

market: if one knows that many are 

harmed or that the magnitude of harm 

is high, they are more likely to 

understand that they are likely to be 

harmed. But, in many circumstances, 

consumers would not have an accurate 

general understanding of risk in the 

market because, for example, either (1) 

they cannot observe harm to other 

consumers, or (2) even if they could, 

they would have no way of knowing 

whether those consumers are similarly 

situated to them. For example, in the 

deposit market, consumers cannot 

observe the frequency with which 

similarly situated consumers incur NSF 

fees. A consumer’s understanding of the 


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125 In theory, financial institutions could provide 

these types of disclosures at deposit account 

opening or before consumers initiate a transaction. 

However, account opening disclosures of this sort 

would likely have limited salience because at that 

moment in time, consumers are not focused on the 

possibility that they will incur a funds insufficiency 

in the future and on the consequences of doing so. 

See Am. Fin. Servs. Ass’n v. FTC, 767 F.2d 957, 978 

(D.C. Cir. 1985) (AFSA). Moreover, as discussed 

above, providing a disclosure prior to the 

transaction might reduce the incidence of abusive 

conduct but would not eliminate it, and would 

likely be too costly or infeasible in most instances. 

126AFSA, 767 F.2d at 978. 

127 FTC v. Neovi, Inc., 604 F.3d 1150, 1158 (9th 

Cir. 2010) (internal citation omitted). 

128See 12 U.S.C. 5531(d)(2)(A). 

129As the Abusive Policy Statement explains, 

‘‘The inquiry under section 1031(d)(2)(A) is 

whether some consumers in question have a lack 

of understanding, not all consumers or even most 

consumers.’’ Abusive Policy Statement at 21888. 

Because the CFPB does not believe that any 

consumer would knowingly incur a fee for no 

service, the lack of understanding would be general 

in regard to NSF fees charged for covered 

transactions, though the specific elements that are 

not understood—risks, costs, or conditions—may 

differ from consumer to consumer. 

130As noted in the Abusive Policy Statement, 

risks can encompass a wide range of potential 

consumer harms. See id. at 21887. Merriam-Webster 

Dictionary Online defines ‘‘risk’’ as the ‘‘possibility 

of loss or injury.’’ See Risk, Merriam-Webster.com 

Dictionary, https://www.merriam-webster.com/ 

dictionary/risk (last visited Jan. 17, 2024). 131As the CFPB explained in the Abusive Policy 

Statement, ‘‘costs’’ can include any monetary 

charge to a person as well as non-monetary costs 

such as lost time, loss of use, or reputational harm. 

See Abusive Policy Statement at 21886; see also, 

e.g., Fort Knox Nat’l Co., File No. 2015–CFPB–0008, 

at 8 (Apr. 20, 2015) (entities took unreasonable 

advantage of consumers’ lack of understanding by 

charging fees that they ‘‘did not adequately 

disclose’’); Consumer Fin. Prot. Bureau, Supervisory 

Highlights, Issue 28, Fall 2022, at 22 (Nov. 2022), 

https://files.consumerfinance.gov/f/documents/

cfpb_supervisory-highlights_issue-28_2022-11.pdf 

(CFPB Fall 2022 Highlights) (mortgage servicers 

took unreasonable advantage of consumers’ lack of 

understanding when they profited from 

insufficiently disclosed phone-payment fees that 

were materially greater than the cost of other 

payment options). 

132As discussed in part I (Background 

discussion), the CFPB recently found that the 

median fee among institutions above $10 billion in 

assets that still charge the fee is $32. 

experience of their peers or general risk 

in the market may sometimes not 

accurately inform their understanding of 

the likelihood of incurring NSF fees 

generally or in connection with a 

particular transaction.125 A consumer’s 

lack of awareness of general risk in the 

market also may not mean that the 

consumer necessarily lacks 

understanding of the risk of using a 

product or service. 

A consumer’s general understanding 

of risk may not always be the sole 

relevant inquiry for purposes of 

ascertaining consumer understanding of 

risk of the likelihood or magnitude of 

harm. As stated earlier, a consumer’s 

lack of understanding can be based on 

specific understanding or general 

understanding, or a mixture of both, and 

each can inform one another. Congress 

enacted the abusive conduct prohibition 

largely in response to the circumstances 

leading up to the 2008 financial crisis, 

where consumers may have generally 

understood the possibility of loan 

default and its consequences but lacked 

understanding of the specific, 

individualized risks set-up-to-fail 

mortgages posed to themselves. 

Regarding unfairness, long-existing 

precedent in part frames the reasonableavoidability analysis through the lens of 

a consumer’s understanding of their 

own circumstances. For example, the 

D.C. Circuit described the reasonableavoidability analysis in the FTC’s Credit 

Practices Rule, in part, in the following 

manner: ‘‘Since consumers do not 

expect to default, the invocation of 

particular credit remedies seems remote 

and speculative at the time of 

contracting and thus is not a material 

element in the consumer’s decision. 

Instead, consumers quite reasonably 

focus their attention on the more 

immediate terms such as interest rates 

and payments.’’ 126 This discussion of 

the conditions relevant to how 

consumers comprehend contract terms 

relates to consumers’ understanding of 

their own risk of default. Similarly, in 

addressing an FTC action against a 

website operator that allowed users to 

create unverified checks drawn from 

unauthorized accounts, the Ninth 

Circuit discussed individual consumer 

circumstances that were relevant to the 

reasonable-avoidability analysis, 

including how it is ‘‘likely that some 

consumers never noticed the 

unauthorized withdrawals.’’ 127 While 

this precedent relates to the prohibition 

on unfair rather than abusive conduct, 

the long history and precedent regarding 

the standards of fair dealing in part 

inform how the CFPB interprets the 

abusive conduct prohibition. 

Material Risks, Costs or Conditions of 

the Product or Service 

As stated above and explained more 

fully below, the CFPB has preliminarily 

determined that consumers charged 

NSF fees on covered transactions would 

lack understanding of the material risks, 

costs, or conditions of their account at 

the time they are initiating covered 

transactions. As explained in the 

preamble discussing proposed 

§ 1042.2(c), a covered transaction means 

a request by a consumer to withdraw, 

debit, pay, or transfer funds from their 

account that is declined instantaneously 

or near-instantaneously by a covered 

financial institution due to insufficient 

funds. The CFPB considers the account 

that is associated with a covered 

transaction to be a ‘‘product or service,’’ 

under CFPA section 1031(d)(2)(A).128

In view of CFPA section 

1031(d)(2)(A)’s disjunctive formulation 

of ‘‘material risks, costs, or conditions,’’ 

an act or practice is abusive if it takes 

unreasonable advantage of the 

consumer’s lack of understanding of at 

least one material risk, cost, or 

condition. In the circumstances 

addressed by this proposal, a lack of 

understanding of all three elements 

would be present for at least some 

consumers, and consumers would 

generally lack understanding of at least 

one element, as explained in the next 

subsection.129

As used in section 1031(d)(2)(A), 

‘‘risks’’ is an expansive term.130 At the 

time a consumer considers initiating a 

request to withdraw, debit, pay, or 

transfer funds from their account, the 

relevant risks to the consumer would 

include the possibility the transaction 

will be declined and result in an NSF 

fee. Furthermore, once a consumer 

actually initiates a covered transaction, 

it is certain that the transaction will be 

instantaneously declined and they will 

be charged a fee; therefore, the 

likelihood of harm at that time is 100 

percent. This is because no chance 

occurrence, consumer choice, or other 

intervening event can happen between 

the transaction’s initiation and the 

instantaneous decline that could change 

the harmful outcome (i.e., the 

assessment of the fee). In other words, 

for covered transactions that are 

initiated, the risk of harm is a certainty. 

Therefore, a consumer who initiates 

such a transaction believing the 

transaction nevertheless might go 

through would lack understanding of 

the likelihood of harm. Given the 

tangible and negative consequences of 

both a transaction decline and the 

imposition of a fee, the CFPB interprets 

this risk, if and when present, to be 

material. 

The ‘‘costs’’ associated with a covered 

transaction that would result in an NSF 

fee would primarily be the amount of 

the fee itself.131 NSF fees that are 

charged in today’s market are usually 

approximately $32 and typically are 

assessed on a per-transaction basis.132

Even if NSF fees assessed on covered 

transactions were significantly lower 

than $32, they would still be material 

because they would be non-trivial to the 

consumer and would be paid without 

any service being received. The personal 

magnitude of this cost might be 

exacerbated by the fact that it could 

occur when the consumer’s bank 


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133The Abusive Policy Statement explains that 

‘‘[g]aps in understanding with respect to 

‘conditions’ include any circumstance, context, or 

attribute of a product or service, whether express 

or implicit. For example, ‘conditions’ could include 

the length of time it would take a person to realize 

the benefits of a financial product or service, the 

relationship between the entity and the consumer’s 

creditors, the fact a debt is not legally enforceable, 

or the processes that determine when fees will be 

assessed.’’ See Abusive Policy Statement at 21887. 

134See id. 

135As noted above in the discussion of the 

CFPB’s approach to the abusive conduct prohibition 

in prior rulemakings, CFPA section 1031(d)(2)(A) 

refers to ‘‘lack of understanding’’ without a 

qualifier, whereas other UDAAP authority 

provisions in CFPA section 1031 expressly include 

a reasonableness qualifier. 

136See Abusive Policy Statement at 21887 

(‘‘While acts or omissions by an entity can be 

relevant in determining whether people lack 

understanding, the prohibition in section 

1031(d)(2)(A) does not require that the entity 

caused the person’s lack of understanding through 

untruthful statements or other actions or omissions. 

Under the text of section 1031(d)(2)(A), the 

consumer’s lack of understanding, regardless of 

how it arose, is sufficient.’’). 

137See id. at 21888. 

138From cashiers physically imprinting card 

details on paper to internet-connected swipe 

terminals, the way consumers pay for goods and 

services has evolved significantly over the last halfcentury, and in turn, computing and 

telecommunication technologies have enabled the 

use of modern payment cards by consumers. In 

1970, 16 percent of American families had a credit 

card; by 1983, that figure increased to 43 percent. 

By 2020, 72 percent of Americans had a credit card 

and 83 percent of Americans had a debit card. See 

Consumer Fin. Prot. Bureau, Issue Spotlight: Big 

Tech’s Role in Contactless Payments: Analysis of 

Mobile Device Operating Systems and Tap-to-Pay 

Practices (Sept. 7, 2023), https://

www.consumerfinance.gov/data-research/researchreports/big-techs-role-in-contactless-paymentsanalysis-of-mobile-device-operating-systems-andtap-to-pay-practices/full-report/. The 2020 Survey 

of Consumer Payment Choice states: ‘‘In a typical 

month in 2020, consumers on average made 23 

debit card payments (33 percent of all payments), 

18 credit or charge payments (27 percent), and 14 

cash payments (21 percent). Consumers made three 

check payments per month on average in 2020, and 

eight [non-debit card] payments directly from a 

bank account . . . Checks were 4 percent of all 

payments, and electronic payments were 11 

percent.’’ Kevin Foster et al., Fed. Rsrv. Bank of 

Atlanta, The 2020 Survey of Consumer Payment 

Choice: Summary Results, at 15 (2021), https://

www.atlantafed.org/-/media/documents/banking/ 

consumer-payments/survey-of-consumer-paymentchoice/2020/2020-survey-of-consumer-paymentchoice.pdf (internal citation omitted). While all 

types of card payments have increased, it is the 

increased usage of debit cards that primarily affects 

consumer deposit accounts because credit or charge 

card payments do not directly or instantaneously 

debit these accounts. 

139See id. See also Bd. of Governors of the Fed. 

Rsrv. Sys., The 2013 Federal Reserve Payments 

Study Recent and Long-Term Trends in the United 

States: 2000–2012 (2012 Summary Report and 

Initial Data Release), at 9 ex. 2 (July 2014), https:// 

www.frbservices.org/assets/news/research/2013-fedres-paymt-study-summary-rpt.pdf (showing the 

average debit card transaction ranged from $37 to 

$40 from 2003–2012, while the average check 

transaction ranged from $1,103 to $1,410), https:// 

www.frbservices.org/binaries/content/assets/ 

crsocms/news/research/2013-fed-res-paymt-studysummary-rpt.pdf; Bd. of Governors of the Fed. Rsrv. 

Sys., Trends in the Use of Payment Instruments in 

the United States, Fed. Rsrv. Bull., at 183–4, 187 tbl. 

3, 196–97 (Spring 2005), https://

www.federalreserve.gov/pubs/bulletin/2005/ 

spring05_payment.pdf (discussing and 

demonstrating the growth in debit card payments, 

which accounted for more than half the growth in 

electronic payments over the review period); Maria 

LaMagna, Debit Cards Gaining on Cash for Smallest 

Purchases, MarketWatch (Mar. 23, 2016), https://

www.marketwatch.com/story/more-people-areusing-debit-cards-to-buy-a-pack-of-gum-2016-03-23 

(describing industry analyst’s take that, ‘‘[A]s more 

locations accept credit and debit cards, more 

consumers are viewing plastic as a more convenient 

option than refilling their wallets with cash from an 

ATM’’). See generally Bd. of Governors of the Fed. 

Rsrv. Sys., Federal Reserve Payments Study (FRPS): 

Previous Studies, https://www.federalreserve.gov/ 

paymentsystems/frps_previous.htm (last updated 

Apr. 21, 2023) (The Federal Reserve Payments 

Studies from 2004 to 2013 (Exhibit 1 in each study) 

show that from 2000 to 2012, annual debit card 

transactions increased from 8.3 billion to 47 billion, 

while annual check transactions decreased from 

41.9 billion to billion to 18.3 billion.). 

140 FDIC 2021 Survey at 26. 

141Pew Rsrch. Ctr., Mobile Fact Sheet (Apr. 7, 

2021), https://www.pewresearch.org/internet/factsheet/mobile/. 

account would be empty or close to 

empty. 

The amount of funds in the account 

and whether they are sufficient for a 

given transaction at the time the 

consumer is initiating that transaction 

are relevant ‘‘conditions’’ of the 

consumer’s deposit account.133 Given 

how the conditions of the account 

would relate to the financial 

institution’s imposition of NSF fees 

(whether, when, and how much), the 

CFPB would interpret these conditions 

as material. 

The following subsection explains 

more fully the CFPB’s preliminary 

finding that a consumer would lack 

understanding of the material risks, 

costs, or conditions of the account if a 

covered transaction were to take place. 

Lack of Understanding on the Part of the 

Consumer 

As the CFPB’s Abusive Policy 

Statement explains, the prohibition in 

CFPA section 1031(d)(2)(A) turns on a 

consumer’s lack of understanding, 

regardless of how that lack of 

understanding arose.134 Although 

consumers’ lack of understanding that 

they will be charged an NSF fee in the 

circumstances addressed in this 

proposal is generally reasonable, the 

statutory text of the prohibition does not 

require a finding that the consumer’s 

lack of understanding was reasonable to 

demonstrate abusive conduct.135 In 

addition, as the Abusive Policy 

Statement notes, the statutory text does 

not require that the covered financial 

institution caused the person’s lack of 

understanding through untruthful 

statements or other actions or 

omissions.136

The CFPB preliminarily finds that a 

consumer who would be charged an 

NSF fee on a covered transaction would 

lack understanding of their account’s 

material risks, costs or conditions at the 

time they initiated that transaction. 

Drawing on its experience and expertise 

regarding consumer behavior, the CFPB 

believes that if a transaction entails 

material risks or costs and consumers 

derive minimal or no benefit from the 

transaction, it is generally reasonable to 

conclude that consumers who 

nonetheless went ahead with the 

transaction did not understand the 

material risks, costs or the conditions 

giving rise to those risks or costs.137 In 

this instance, such a transaction would 

provide no benefit to consumers, but 

consumers would incur a material cost 

or risk. Consequently, consumers would 

be paying something or taking a risk but 

receiving nothing in return. Therefore, 

the CFPB preliminarily concludes that 

consumers initiating covered 

transactions that incur NSF fees would 

generally lack awareness of their 

available account balance or other 

information about the material risks, 

costs, or conditions regarding their 

account. Indeed, if a consumer knew at 

the time of initiating a specific payment, 

debit, transfer, or withdrawal that they 

did not have enough funds to cover the 

transaction and an NSF fee would be 

charged, that consumer would likely 

either use a different payment method 

that would not result in such a fee or 

would postpone or forgo the transaction. 

As explained further below, the CFPB 

also preliminarily concludes that there 

are a variety of specific reasons why 

consumers generally, or certain 

consumers individually, would lack 

understanding of the material risks, 

costs, or conditions when initiating a 

covered transaction. First, consumers’ 

usage of deposit accounts has changed 

due to the advent and increased 

importance of debit cards during the 

past several decades.138 The rise in 

debit card usage for small transactions 

resulted in increased transaction 

activity on the account for consumers’ 

individual purchases.139 These more 

frequent transactions might make it 

harder for some consumers to track their 

available funds. Although most 

consumers can now see a version of 

their account balance electronically 

through a mobile application, older 

consumers are far less likely to access 

their accounts through mobile apps,140

and approximately 15 percent of 

Americans do not own a smartphone.141

Even if consumers can access their 

account balance, the number displayed 


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142See, e.g., Lauren Debter, Why You Can’t Trust 

Your Online Bank Account Balance in the 

Smartphone Era, Forbes (July 13, 2016), https://

www.forbes.com/sites/laurengensler/2016/07/13/ 

online-bank-account-balance-overdraft-fees (Debter 

2016). 

143Financial institutions typically assign each 

account an overdraft coverage limit, which 

represents the maximum amount of overdraft 

coverage the financial institution is willing to 

extend on the account. Once an account reaches its 

overdraft coverage limit, the financial institution 

will no longer pay items into overdraft, but will 

return those items unpaid. Financial institutions 

often do not communicate overdraft coverage limits 

to consumers. See CFPB White Paper at 48–52. 

144Overdraft and NSF Report at 16, 17 tbl. 6. 

145See, e.g., Debter 2016. 

146 74 FR 59033, 59038 (Nov. 17, 2009). 

147Pew Charitable Tr., Overdrawn: Persistent 

Confusion and Concern about Bank Overdraft 

Practices, at 5 (June 2014), https://

www.pewtrusts.org/-/media/assets/2014/06/26/

safe_checking_overdraft_survey_report.pdf 

(describing how more than half of those who 

incurred a debit card overdraft penalty fee do not 

believe that they opted in to overdraft coverage). 

148See generally Press Release, Consumer Fin. 

Prot. Bureau, CFPB Releases Reports on Banking 

Access and Consumer Finance in Southern States 

(June 21, 2023), https://www.consumerfinance.gov/ 

about-us/newsroom/cfpb-releases-reports-onbanking-access-and-consumer-finance-in-southernstates/ (describing the CFPB’s work on the Rural 

South); Fed. Rsrv. Bank of St. Louis, Banking 

Deserts Become a Concern as Branches Dry Up (July 

25, 2017), https://www.stlouisfed.org/publications/ 

regional-economist/second-quarter-2017/bankingdeserts-become-a-concern-as-branches-dry-up 

(‘‘The closing of thousands of bank branches in the 

aftermath of the 2007–09 recession has served to 

intensify societal concerns about access to financial 

services among low[-]income and minority 

populations . . . .’’); Donald P. Morgan et al., 

Banking Deserts, Branch Closings, and Soft 

Information, Liberty St. Econ. (Mar. 7, 2016), 

https://libertystreeteconomics.newyorkfed.org/ 

2016/03/banking-deserts-branch-closings-and-softinformation/ (‘‘U.S. banks have shuttered nearly 

5,000 branches since the financial crisis, raising 

concerns that more low-income and minority 

neighborhoods may be devolving into ‘banking 

deserts’ with inadequate, or no, mainstream 

financial services.’’); Hoai-Luu Q. Nguyen, Are 

Credit Markets Still Local? Evidence from Bank 

Branch Closings, 11(1) Am. Econ. J.: Econ. Pol’y 1 

(2019), https://www.aeaweb.org/articles?

id=10.1257/app.20170543 (showing that distance to 

bank branches affects credit access for small 

businesses); Jung Sakong & Alexander K. Zentefis, 

Bank Access Across America, Fed. Rsrv. Bank of 

Chi. (Feb. 15, 2022), https://www.chicagofed.org/ 

publications/working-papers/2023/2023-15 

(showing how distance to a bank branch affects 

bank branch use and banking access). 

149 FDIC 2021 Survey at 34 tbl. 6.6. 

may not reflect what is available when 

the transaction takes place.142

Furthermore, some consumers with 

smartphones might forgo checking their 

balance before initiating a covered 

transaction for a variety of reasons, 

including the rapidity of these 

transactions (see below) and discomfort 

with pulling up account information in 

a public location or using public Wi-Fi. 

And while ATM users can check their 

balance on the screen, some consumers 

may want to avoid incurring a fee to do 

so (particularly at an out-of-network 

ATM). 

Second, certain account features and 

settlement practices that are unknown, 

complex, or counterintuitive make it 

challenging for consumers to 

understand whether they have the funds 

available for a transaction at a given 

time, or how that transaction would be 

handled. These complications make it 

difficult for consumers to understand 

the material risks, costs, or conditions 

when initiating a covered transaction. 

One example would be when a 

consumer has opted into overdraft 

coverage on ATM or one-time debit card 

transactions and expects the financial 

institution to pay a transaction into 

overdraft, but the institution instead 

denies overdraft coverage and charges 

an NSF fee, possibly because the 

consumer unknowingly exceeded the 

overdraft coverage limit that the 

financial institution had set for that 

particular customer.143 An analysis of 

supervisory data on NSF practices at 

eight very large financial institutions 

suggests that 84.3 percent of NSF fees 

were assessed on accounts with 

overdraft coverage in 2022.144 Other 

examples that could cause a lack of 

understanding of the material risks, 

costs or conditions of a consumer’s 

account would be if the consumer were 

unaware of whether scheduled 

transactions, checks, or other noninstantaneous withdrawals had settled, 

or whether or not recent deposits had 

become fully available.145

Third, some consumers would not 

understand that it is even possible to 

overdraw their accounts with ATM or 

debit cards, or with a P2P transaction— 

in contrast to other payment methods 

such as checks and ACH transactions. 

As the Board explained in the 2009 Optin Rule, ‘‘many consumers may not be 

aware that they are able to overdraft at 

an ATM or [point of sale]’’ and ‘‘[d]ebit 

cards have been promoted as budgeting 

tools, and a means for consumers to pay 

for goods and services without incurring 

additional debt.’’ 146 Even following 

implementation of the 2009 Opt-in Rule, 

consumers have experienced confusion 

about whether their cards could 

overdraw their accounts.147

Furthermore, consumers who did not 

elect to opt into overdraft coverage on 

ATM and one-time debit card 

transactions may be especially likely to 

lack understanding in this context, since 

they may believe that it is not possible 

to incur a fee (whether called an 

overdraft or an NSF fee) on these 

covered transactions. 

Fourth, for many covered transactions 

under this proposal, the decisionmaking environment and rapidity of the 

consumer’s required choices at the 

merchant POS, ATM, or online may 

contribute to consumers’ lack of 

understanding of the material costs, 

risks, or conditions of these 

transactions, particularly in conjunction 

with the reasons discussed above. 

Although, as noted above, many 

consumers can now check their account 

balances on a smartphone, when a 

consumer purchases a good or service at 

a merchant POS terminal, makes an 

online purchase, or uses an ATM, the 

transaction typically occurs very rapidly 

and the consumer may not have time (or 

may perceive that they do not have 

time) to check the account balance, 

which may itself be a moving target if 

there are transactions that have not 

settled (see earlier discussion). 

Moreover, the burden of checking a 

balance immediately prior to a purchase 

is likely to be higher for economically 

vulnerable consumers, who are less 

likely to have internet or smartphone 

access to their depository accounts. This 

increased expected burden of getting 

information on an account balance, 

which may sometimes entail a fee when 

a vulnerable consumer has limited 

access to a bank branch with an innetwork ATM, would make information 

acquisition about balances less likely 

and could make covered transactions 

more likely.148

The decision-making environment 

and rapidity of the consumer’s choices 

may also contribute to consumers’ lack 

of understanding of the material costs, 

risks, or conditions of many P2P 

covered transactions. Per the 2021 FDIC 

Survey, consumer households use 

nonbank online payment services to 

send or receive money (58.2 percent), 

make purchases in person (30.4 

percent), and make purchases online 

(63.9 percent).149 When a consumer 

purchases a good or service in person 

using a debit card, makes an online 

purchase, or sends money to a friend, 

the transaction occurs very rapidly and 

misremembering their account balance 

is possible. Although the speed and 

convenience can generally be viewed as 

positive features of such transactions for 

consumers, the CFPB preliminarily 

believes that these features, in 

conjunction with other issues, may 

make it more challenging for consumers 

to understand those transactions’ 

material costs, risks, or conditions. 

Unreasonable Advantage-Taking 

Under CFPA section 1031(d)(2)(A), a 

practice is abusive if it takes 

unreasonable advantage of consumers’ 


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150The CFPB notes that the fee charged in this 

situation would involve unreasonable advantagetaking no matter what specific situation creates the 

lack of understanding that is taken advantage of and 

whether it relates to lack of understanding of a 

material cost, risk, or condition or more than one 

of those factors. 

151See Abusive Policy Statement at 21886. Cf., 

e.g., Swift & Co. v. Wallace, 105 F.2d 848, 854–55 

(7th Cir. 1939) (‘‘ ‘[U]nreasonable’ is not a word of 

fixed content and whether preferences or 

advantages are unreasonable must be determined by 

an evaluation of all cognizable factors which 

determine the scope and nature of the preference 

or advantage.’’). 

152Abusive Policy Statement at 21886. 

153See id. 

154See footnote 32. 

155As the CFPB explained in the Abusive Policy 

Statement, ‘‘One may also assess whether entities 

are obtaining an unreasonable advantage by 

considering whether they are reaping more benefits 

as a consequence of the statutorily identified 

circumstances, or whether the benefit to the entity 

would have existed if the circumstance did not 

exist,’’ meaning that, ‘‘[i]n other words, entities 

should not get a windfall due to’’ one or more of 

the enumerated conditions under CFPA section 

1031(d)(2). See Abusive Policy Statement at 21886. 

See also JPay, LLC, File No. 2021–CFPB–0006 (Oct. 

19, 2021) (consent order describing an abusive 

practice where a firm leveraged an exclusive 

contract to charge fees on prepaid cards used to 

provide money to individuals being released from 

prison or jail and where the prepaid cards replaced 

the feeless option of receiving such money as cash 

or by check that previously had been offered by 

prisons and jails); CFPB Fall 2022 Highlights at 22 

(describing how mortgage servicers took 

unreasonable advantage of consumers’ lack of 

understanding when they profited from 

insufficiently disclosed phone-payment fees that 

were materially greater than the cost of other 

payment options). 

156See In re Checking Acct. Overdraft Litig., 694 

F. Supp. 2d 1302, 1320–21 (S.D. Fla. 2010). 

157As the Abusive Policy Statement noted, 

‘‘Congress prohibited certain . . . acts or practices 

that—contrary to many consumer finance 

relationships where the company benefits from 

consumer success—generate benefit for a company 

when people are harmed.’’ Abusive Policy 

Statement at 21886. 

158As the CFPB’s Abusive Policy Statement 

explained, ‘‘The financial crisis was set in motion 

by a set of avoidable interlocking forces—but at its 

core were mortgage lenders profiting (by 

immediately selling on the secondary market) on 

loans that set people up to fail because they could 

not repay.’’ See Abusive Policy Statement at 21884; 

see also S. Rep. No. 111–176, at 11 (2010), https:// 

www.congress.gov/congressional-report/111thcongress/senate-report/176/1 (‘‘Th[e] financial 

crisis was precipitated by the proliferation of poorly 

underwritten mortgages with abusive terms, 

followed by a broad fall in housing prices as those 

mortgages went into default and led to increasing 

foreclosures.’’). 

159See Abusive Policy Statement at 21886. 

160See 85 FR 44382, 44420 (July 22, 2020) (‘‘As 

a preliminary matter, the [CFPB] declines to use 

this rulemaking to articulate general standards 

addressing whether the conduct of lenders or other 

financial services providers take unreasonable 

advantage of consumers. Instead, the [CFPB] will 

articulate and apply such standards, including the 

2017 [rule’s] four-factor analysis, to the extent 

necessary to decide the specific issue in this 

rulemaking, namely, whether lenders take 

lack of understanding of the material 

risks, costs, or conditions of a consumer 

financial product or service. The CFPB 

preliminarily concludes that the 

practice of charging NSF fees on 

covered transactions takes unreasonable 

advantage of consumers’ lack of 

understanding of the above-referenced 

material risks, costs, or conditions of 

their accounts when they initiate those 

transactions.150

A determination of unreasonable 

advantage-taking, as the Abusive Policy 

Statement explains, involves an 

evaluation of the facts and 

circumstances that may affect the nature 

of the advantage and the question of 

whether the advantage-taking was 

unreasonable under the 

circumstances.151 The Abusive Policy 

Statement also explains that such an 

evaluation does not require an inquiry 

into whether the advantage-taking is 

typical or not—that even a relatively 

small advantage may be abusive if it is 

unreasonable, and that one may rely on 

qualitative assessment rather than an 

investigative accounting of costs and 

benefits to determine whether a covered 

financial institution takes an 

unreasonable advantage.152

There is a point at which a covered 

financial institution’s conduct in 

leveraging its superior information 

becomes unreasonable advantage-taking 

and thus is abusive. A number of 

analytical methods, including but not 

limited to those described in the 

Abusive Policy Statement, can be used 

to evaluate unreasonable advantagetaking.153 The identified practice in this 

proposal preliminarily constitutes 

unreasonable advantage-taking under 

multiple of those analytical methods. 

First, NSF fees are not fees for a 

service. Profiting from transactions 

where the consumer receives no service 

in return raises threshold concerns that 

a covered financial institution may be 

engaging in unreasonable advantagetaking. If a covered financial institution 

were to assess an NSF fee on a covered 

transaction, the practice would impose 

a cost (approximately $32 based on 

current NSF fees) with no benefit to the 

consumer, while at the same time 

imposing only an apparently de 

minimis cost on the covered financial 

institution ($0.005 at most, according to 

a 2021 Board survey) 154 that 

presumably could easily be recovered 

via fees collected on successful 

transactions. As noted above, charging 

an NSF fee in connection with a covered 

transaction would result in the 

consumer paying something for 

receiving nothing. This effectively turns 

the fee into a penalty fee. The CFPB 

notes that a consumer may already 

suffer disruption in the first instance by 

the decline of the covered transaction 

itself, whether through non-receipt of an 

expected good or service, 

embarrassment, or other adverse 

consequences. The NSF fee would 

compound that disruption by imposing 

a material cost. 

Although the data noted above 

indicates that the cost to covered 

financial institutions of declining 

covered transactions appears to be de 

minimis, the CFPB requests submission 

of further data on these costs, as well as 

comment on the possibility of limiting 

the determination of unreasonable 

advantage-taking and the corresponding 

prohibition to allow for cost recovery. 

Second, covered financial institutions 

would have no reason for imposing such 

fees other than reaping a windfall, 

because they could simply refuse to 

authorize the transaction 

instantaneously, which, as discussed 

above, would impose negligible cost on 

them.155 The CFPB notes that in 

consumer litigation about banks’ 

charging of fees on debit card 

transactions prior to the 2009 Opt-in 

Rule, one court held, for purposes of 

opining on a motion to dismiss, that 

charging such fees was an 

unconscionable practice under State law 

in part because the banks’ ability to 

make an instantaneous decision about 

whether to process or decline a debit 

card transaction means there is less risk 

to the banks of the account having 

insufficient funds to cover the 

transaction.156

Third, covered financial institutions 

that charge NSF fees on covered 

transactions would be benefiting from 

negative consumer outcomes that result 

from one of the enumerated factors 

identified in CFPA section 

1031(d)(2),157 i.e., a consumer’s lack of 

understanding. As the Abusive Policy 

Statement explains, Congress, partly in 

response to the financial crisis, 

prohibited certain abusive business 

models and other acts or practices 

that—contrary to standard consumer 

finance relationships where the 

company benefits from consumer 

success—misalign incentives and 

generate benefit for a company when 

people are harmed.158 The CFPB 

generally considers it unreasonable for a 

financial institution to benefit from, or 

be indifferent to, negative consumer 

outcomes resulting from a consumer’s 

lack of understanding.159

Finally, in assessing whether the 

practice at issue here involves 

unreasonable advantage-taking, a 

relevant factor is the vulnerability of 

many of the consumers who would 

incur such NSF fees if they were 

imposed.160 Although consumers of all 


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unreasonable advantage of consumers if the lenders 

make covered loans without determining whether 

borrowers have the ability to repay them.’’). 

161CFPB 2017 Data Point at 25 tbl. 3 (showing 

that consumers with high balances may also be 

heavy overdrafters). 

162See, e.g., Bd. of Governors of the Fed. Rsrv. 

Sys., Economic Well-Being of U.S. Households in 

2022, at 29 (May 2023), https://www.federalreserve.

gov/publications/files/2022-report-economic-wellbeing-us-households-202305.pdf. 

163See Rob Levy & Joshua Sledge, Complex 

Portrait: An Examination of Small-Dollar Credit 

Consumers, Ctr. for Fin. Servs. Innovation (2012), 

https://s3.amazonaws.com/cfsi-innovation-files/wpcontent/uploads/2017/01/31163518/A-ComplexPortrait-An-Examination-of-Small-Dollar-CreditConsumers.pdf (discussing how financial shortfalls 

may be due to mismatched timing between income 

and expenses, misaligned cash flows, income 

volatility, unexpected expenses or income shocks, 

or expenses that simply exceed income, and noting 

that 32 percent of users of small-dollar credit 

products reported misaligned cash flow as the 

precipitating factor for their borrowing, while 30 

percent reported chronic income shortfalls). 

164Through its supervisory work, the CFPB has 

learned that at seven very large financial 

institutions in 2022 consumer accounts with an 

average balance below $500 had more than 20 times 

as many NSF transactions and more than 11 times 

as many NSF fees as consumer accounts with an 

average balance above $1,500. Overdraft and NSF 

Report at 17 tbl. 6. 

income levels overdraw their checking 

accounts,161 more affluent consumers 

are more likely to be able to maintain a 

cushion to help avoid doing so. As 

research shows, less well-off, more 

economically vulnerable consumers are 

more likely to be struggling to meet their 

regular expenses.162 For these 

vulnerable consumers, maintaining such 

a cushion often is not possible.163 As a 

result, NSF fees function as a penalty 

imposed on these consumers because 

they do not have enough money in their 

account, whether that deficiency is due 

to chronic income shortfalls, timing 

mismatches regarding inflows and 

outflows over which they have no 

control, or other reasons.164 The harm 

inflicted on economically vulnerable 

consumers from such fees, if they were 

to be charged, would likely be greater 

than that which more affluent 

consumers would suffer. Because much 

of the windfall from charging NSF fees 

on covered transactions would be 

gained from vulnerable consumers in 

exchange for providing no benefit to 

them, a covered financial institution 

would be taking unreasonable advantage 

of such consumers in doing so. As with 

consumers in general, the profit accrued 

from imposing NSF fees in this 

circumstance would be derived directly 

from vulnerable consumers’ lack of 

understanding. This practice would 

constitute unreasonable advantagetaking because covered financial 

institutions are profiting directly from 

consumer hardship rather than from 

providing useful services to avoid or 

alleviate it. 

V. Proposed Effective Date 

The CFPB is proposing that this rule 

have an effective date of 30 days after 

publication of a final rule in the Federal 

Register. The CFPB is proposing this 

expedited effective date because the 

practice that would be prohibited based 

on the CFPB’s preliminary abusive 

conduct determination is not thought to 

be prevalent today, and therefore any 

burdens associated with 

implementation of this proposal, if 

finalized, should be minimal. However, 

since the CFPB understands that a 

limited number of providers may 

currently charge fees that would be 

subject to the prohibition, the CFPB 

seeks comment on whether the 

proposed effective date should be 

modified to provide additional time for 

implementation. 

VI. CFPA Section 1022(b) Analysis 

A. Overview 

In developing the proposed rule, the 

CFPB has considered the proposed 

rule’s potential benefits, costs, and 

impacts in accordance with section 

1022(b)(2)(A) of the CFPA. The CFPB 

requests comment on the preliminary 

analysis presented below and 

submissions of additional data that 

could inform the CFPB’s analysis of the 

benefits, costs, and impacts. In 

developing the proposed rule, the CFPB 

has consulted with the appropriate 

prudential regulators and other Federal 

agencies, including regarding the 

consistency of the proposed rule with 

any prudential, market, or systemic 

objectives administered by those 

agencies, in accordance with section 

1022(b)(2)(B) of the CFPA. 

B. Goals of the Proposed Rule 

The CFPB is proposing this rule 

because of its preliminary determination 

that consumers would lack 

understanding of the material risks, 

costs, or conditions of a covered 

financial institution’s charging of an 

NSF fee in connection with a covered 

transaction. In general, if consumers 

lack understanding of the material risks, 

costs, or conditions of a particular 

transaction, their choices may be 

suboptimal from an economic 

perspective. 

C. Data Limitations and Quantification 

of Benefits, Costs, and Impacts 

The discussion below relies on 

information that the CFPB has obtained 

from industry and publicly available 

sources, including reports published by 

the CFPB. These sources form the basis 

for the CFPB’s consideration of the 

likely impacts of the proposed rule. The 

CFPB provides estimates, to the extent 

possible, of the potential benefits and 

costs to consumers and covered persons 

of this proposal given available data. 

The specific data sources that inform 

this discussion and the CFPB’s existing 

analysis include public call report data, 

internal data provided by financial 

institutions through supervisory 

information requests, and research 

published by the CFPB. In addition, the 

existing academic literature as well as 

policy work conducted by State 

regulators, and by the Board were 

considered. 

There remain important data 

limitations that preclude a more 

exhaustive determination of the 

proposed rule’s benefits, costs, and 

impacts. Foremost among them is that 

the existing data sources and evidence 

available to the CFPB generally do not 

separately identify whether NSF 

transactions or NSF fees were incurred 

on requests by consumers to withdraw, 

debit, pay, or transfer funds from their 

checking, savings, or consumer asset 

account where the transaction is 

declined instantaneously or nearinstantaneously by the financial 

institution (henceforth, covered 

transactions). In part, this reflects the 

CFPB’s understanding of the current 

prevalence of the practice; based on its 

market monitoring activities the CFPB 

believes that covered financial 

institutions rarely charge NSF fees on 

covered transactions. 

Relatedly, quantifying the benefits, 

costs, and impacts of the proposed rule 

requires quantifying future consumer 

and covered financial institution 

behavior both with and without the 

proposed changes, and the CFPB is not 

aware of available data that could be 

used to generate reliable predictions 

about such future behavior. In 

particular, there is considerable 

uncertainty around the future frequency 

with which financial institutions would 

charge NSF fees on covered transactions 

in the absence of the proposed rule. 

This includes uncertainty about how 

many, and which financial institutions 

would begin charging NSF fees on 

covered transactions as well as at what 

rate and fee amount these fees would be 

assessed. To reflect this uncertainty, the 

CFPB considers a range of ways in 

which market practices might evolve in 

the absence of the proposed rule when 

calculating the costs, benefits, and 

impacts of the proposed rule. 

The data, prior research, and existing 

policy work available to the CFPB or 

with which the CFPB is familiar provide 

an important basis for understanding 


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165See part I (Background discussion) for a 

discussion of NSF fees assessed on non-covered 

transactions. 

166Throughout this section, ‘‘NSF transactions’’ 

refer to requests by consumers to withdraw, debit, 

pay, or transfer funds from their checking, savings, 

or consumer asset account for an amount greater 

than the available funds in the account and where 

the transaction is declined by the financial 

institution. 

167See FRB 2022 Payments Study. 

168The FRPS data are not informative about the 

possibility of NSF fees being assessed on person-toperson (P2P) transactions, as P2P transactions are 

not included in the FRPS data. Whether their 

inclusion would increase or decrease the estimate 

of the share total non-cash payments that are 

covered transactions will depend on whether the 

ratio of covered to non-covered transactions is 

higher or lower for P2P transactions than it is for 

the non-P2P non-cash payments included in the 

FRPS data. However, the CFPB notes that because 

P2P transactions currently make up a relatively 

small share of non-cash payments, their inclusion 

is unlikely to affect this estimate by much. 

169An additional possibility is that, to the extent 

financial institutions would have charged NSF fees 

on covered transactions under the baseline, those 

financial institutions could respond to the proposed 

rule by attempting to offset lost NSF revenue 

through changes in other account fees or prices. 

Any increases in these fees would decrease the 

benefit of the proposed rule for some consumers, 

with the net change in fee incidence (the decrease 

in NSF fee incidence and the increase in offsetting 

fee incidence) determining whether consumers 

benefit from the proposed rule. 

the potential effects of the proposed 

rule, albeit without being sufficient to 

completely quantify the potential effects 

of the proposal for consumers and 

covered persons. The deficits in existing 

data and evidence are due primarily to 

the proposed rule addressing practices 

not thought to currently be prevalent in 

consumer financial markets, to existing 

data not enabling the identification of 

covered transactions, to difficulty 

predicting the evolution of the market, 

and to the lack of existing evidence on 

the magnitude or direction of potential 

behavioral responses by consumers and 

covered persons to policies like the 

proposed rule. While the CFPB 

acknowledges these data limitations, the 

analysis below provides quantitative 

estimates where possible alongside 

qualitative discussions of the proposed 

rule’s benefits, costs, and impacts. 

General economic principles and the 

CFPB’s expertise, together with the 

available data, allow the CFPB to 

provide insight into these benefits, 

costs, and impacts. The CFPB requests 

additional data or studies that could 

help quantify the benefits and costs to 

consumers and covered persons of the 

proposed rule including information 

related to the current or likely future 

incidence of NSF fees on covered 

transactions. 

D. Baseline for Analysis 

In evaluating the proposal’s benefits, 

costs, and impacts, the CFPB considers 

the impacts of the proposed rule against 

a baseline in which the proposed rule 

does not become effective. The baseline 

the CFPB considers corresponds to 

current law, wherein NSF fees are not 

explicitly prohibited for covered 

transactions. Based on its market 

monitoring activities, the CFPB 

understands that covered financial 

institutions rarely charge NSF fees on 

covered transactions; however, the 

CFPB is uncertain about the extent to 

which such fees are currently charged 

and the CFPB believes there is a risk 

that such fees may be charged to a 

greater degree in the future. The CFPB 

recognizes that financial institutions 

have incentives to generate new 

revenue; assessing NSF fees on covered 

transactions is one potential source of 

new revenue. Additionally, if the 

Overdraft Proposed Rule is finalized 

and reduces overdraft fee revenue for 

covered financial institutions, it may 

lead some institutions to consider 

imposing new fees. Increasing the 

prevalence of NSF fees on covered 

transactions could be one way that 

covered financial institutions respond, 

while market forces could lead even 

non-covered financial institutions to 

begin charging NSF fees on covered 

transactions. 

Accordingly, for the baseline, the 

CFPB considers potential NSF market 

practices that range from financial 

institutions rarely charging NSF fees on 

covered transactions to a scenario where 

some financial institutions charge NSF 

fees on covered transactions. The CFPB 

believes that, absent the proposed rule, 

it is unlikely that NSF fees on covered 

transactions would be assessed at a rate 

greater than the rate at which they are 

currently charged on non-covered 

transactions.165 To estimate the share of 

total NSF transactions 166 that would be 

covered, the CFPB uses data from the 

Federal Reserve Payments Study 

(FRPS) 167 to calculate the percent of 

total non-cash payments that were nonprepaid debit card payments in 2021: 

44.7 percent. As further discussed 

below, this is informative of an upper 

bound on how large the impact of the 

proposed rule might be.168

For costs, benefits, and impacts, the 

CFPB estimates annual values and, 

absent any evidence to suggest that the 

values would change over time, the 

CFPB assumes that the annual values 

persist indefinitely. 

The CFPB requests comment on the 

approach to evaluating the proposal’s 

benefits, costs, and impacts and, 

specifically, on the assumptions 

implicit in providing estimates that 

correspond to a range of future NSF 

market practices. 

E. Potential Benefits and Costs to 

Consumers and Covered Persons 

1. Potential Benefits and Costs to 

Consumers 

The proposal to prohibit NSF fees on 

covered transactions would directly 

benefit consumers who would have 

been assessed NSF fees on covered 

transactions by reducing the amount 

that they pay in NSF fees. In addition 

to the direct benefits from the absence 

of NSF fees, a prohibition on NSF fees 

could have several indirect impacts on 

consumers who would otherwise have 

been charged NSF fees. First, for 

consumers with account balances low 

enough that an NSF fee brings their 

balance below zero or farther below 

zero, NSF fees may lead consumers to 

have their account closed or to have 

their account information furnished to a 

checking account reporting company, 

which could make getting access to a 

new depository account more difficult 

in the future. By prohibiting NSF fees, 

the proposed rule should reduce (to 

zero) the likelihood of these indirect 

impacts of NSF transactions. Second, 

without the ability to assess NSF fees on 

transactions that consumers undertake 

without sufficient funds, financial 

institutions may opt to allow additional 

transactions to go through and charge 

overdraft fees instead. By allowing 

accounts to go into overdraft this 

implies more consumers will receive the 

item(s) they were attempting to 

purchase, though they may be assessed 

an overdraft fee. A third possibility is 

that a prohibition on NSF fees could 

reduce expected revenue for the 

consumer segments most likely to incur 

NSF fees and result in financial 

institutions being less willing to open 

depository accounts for those 

consumers.169

As discussed further below, the extent 

of any of these benefits depends on the 

extent to which NSF fees would be 

charged on covered transactions under 

the baseline. To the extent NSF fees 

would be charged, the direct effects of 

the proposed rule should benefit 

consumers by reducing the amount they 

pay in NSF fees. Similarly, the first 

above-mentioned indirect effect—a 

decreased likelihood of depository 

account closure and having negative 

information furnished to a checking 

account reporting company—should 

increase consumer welfare. Consumer 

welfare could increase or decrease from 

having more transactions go through 

and being assessed an overdraft fee 

instead of an NSF fee; whether 

consumers benefit will depend on the 


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170See CFPB October 2023 Data Spotlight. The 

CFPB arrived at this estimate by analyzing NSF fee 

practices of banks with over $10 billion in assets 

as of March 31, 2023, and the 75 banks that 

collected the most overdraft/NSF fee revenue in 

2021 (some of which are under $10 billion in total 

assets). For each of these institutions, NSF revenue 

based on FFIEC Call Report data is calculated by 

taking 18.9 percent of reported overdraft/NSF fee 

revenue (except in cases where the bank did not 

have an overdraft program). Institutions that no 

longer charge NSF fees account for 86 percent of the 

total estimated NSF fee revenue of all banks over 

$1 billion in total assets. The remaining 14 percent 

of estimated 2021 NSF fee revenue is equal to 

approximately $250 million. 

171Call Report data do not include information on 

overdraft or NSF fee revenue for credit unions or 

for banks with $1 billion or less in assets. To 

account for this, the CFPB uses data collected from 

core processors for the number of accounts by asset 

size and the overdraft/NSF revenue per account, 

and from 2014 call report data for the distribution 

of institutions by asset size, and then assumes that 

overdraft/NSF revenue at small institutions saw the 

same growth from 2014 to 2019 as large banks, to 

arrive at a 2019 estimate. These extrapolations 

suggest that banks with over $1 billion in total 

assets comprise 77.4 percent of marketwide 

overdraft/NSF revenue. See CFPB 2021 Data Point 

at 7. For the annual projection, the CFPB assumes 

that banks with assets over $1 billion represent the 

same relative portion of total marketwide overdraft/ 

NSF revenue as they did in 2019. The CFPB then 

multiplies the annual NSF fee revenue projection 

by 1/0.774 to arrive at an estimate of NSF fee 

revenue from all financial institutions of $323 

million. The CFPB also explored using the share of 

consumer deposits at banks with assets over $1 

billion based on FFIEC and NCUA call report data 

from the fourth quarter of 2022 to extrapolate 

projected annual NSF revenue for banks with assets 

over $1 billion to arrive at a projected marketwide 

estimate for annual NSF revenue. For credit unions, 

the CFPB sums all possible shares and deposits for 

consumers. For Banks and Thrifts, the CFPB sums 

noninterest-bearing and interest-bearing deposits of 

individuals, partnerships, and corporations held in 

domestic offices (total deposits). The CFPB 

additionally sums the value of deposits of any type 

intended primarily for individuals for personal, 

household, or family use as reported only by Banks 

and Thrifts with more than $1 billion in total assets 

(consumer deposits). The CFPB then calculates the 

median share of total deposits that are represented 

by consumer deposits at banks and thrifts with 

between $1 billion and $10 billion in total assets 

(0.41). The CFPB multiplies the total deposit 

amount for Banks and Thrifts with less than $1 

billion in total assets by this share, to arrive at an 

estimate of consumer deposits for each bank or 

thrift in the fourth quarter of 2022. The CFPB sums 

consumer deposits or imputed consumer deposits 

across all financial institutions regardless of size 

and calculate the ratio of consumer deposits held 

by banks and thrifts with more than $1 billion in 

total assets to total consumer deposits: 0.75. If the 

CFPB were to use this extrapolation factor to arrive 

at a marketwide estimate, it would multiply the 

annual NSF fee revenue estimate by 1/0.75 to arrive 

at a similar estimate of NSF fee revenue from all 

financial institutions of $333 million. 

relative size of NSF and overdraft fees 

as well as how much consumers value 

the goods or services they were 

attempting to purchase. Consumer 

welfare could also decrease if the 

inability to assess and collect NSF fees 

makes financial institutions less willing 

to offer depository accounts to certain 

consumers. 

Direct Effects 

As discussed above, the proposed rule 

will directly benefit consumers to the 

extent that NSF fees would have been 

charged on covered transactions, which 

are estimated to represent 44.7 percent 

of checking account transactions based 

on 2021 FRPS data. The CFPB 

understands that it is currently 

uncommon for financial institutions to 

charge NSF fees on covered 

transactions, but the CFPB does not 

have reliable data on how frequent the 

practice might be either now or in the 

future. 

Recent CFPB analysis of Call Report 

data suggests that even after sharp 

declines in the number of banks with 

over $1 billion in assets charging NSF 

fees, consumers will be paying roughly 

$250 million annually in NSF fees to 

banks with more than $1 billion in 

assets.170 The CFPB estimates that an 

additional $73 million in annual NSF 

fees is being paid to banks with less 

than $1 billion in assets and to credit 

unions, for a total of $323 million in 

annual NSF fees.171

Of this total, the CFPB’s 

understanding is that the large majority 

was paid on non-covered transactions 

and therefore would be unaffected by 

the proposed rule, and the CFPB does 

not have definitive evidence with which 

to forecast the revenue that might be 

generated by covered transactions in the 

future under the baseline. As a starting 

point to arrive at a range of possible 

future NSF fee practices for covered 

transactions, the CFPB begins from our 

current annual estimate of all NSF fee 

revenue: $323 million. As a likely lower 

bound for potential future NSF fee 

market practices, the CFPB considers 

the scenario where NSF fees are rarely 

charged on covered transactions. This 

would suggest that the $323 million in 

current annual NSF fee revenue 

corresponds to $0 in future NSF fee 

revenue from covered transactions. As a 

more probable range of potential future 

NSF fee market practices for covered 

transactions, if projected annual NSF fee 

revenue for covered transactions were to 

correspond to between 5 and 20 percent 

of current annual NSF fee revenue, it 

would suggest between $16.2 million 

and $64.6 million in annual NSF 

revenue from covered transactions. The 

proposed rule would therefore indicate 

a direct benefit to consumers of between 

$16.2 million and $64.6 million in 

reduced NSF fees. 

The CFPB seeks comment on the 

extent to which NSF fees are currently 

charged on covered transactions and the 

extent to which they might be charged 

on covered transactions in the future. 

Indirect Effects 

To the extent covered financial 

institutions would have charged NSF 

fees on covered transactions under the 

baseline, the proposed rule would 

benefit consumers by reducing to zero 

the probability that an NSF fee on a 

covered transaction would bring their 

account balance below zero and cause 

their account to be closed or their 

information to be furnished to a 

checking account reporting company. 

The indirect benefits to consumers from 

these reductions would increase 

consumer welfare for the consumers 

that would have experienced these 

events in the absence of the proposed 

rule. 

The extent of these indirect benefits 

depends on the prevalence and amount 

of NSF fees charged on covered 

transactions under the baseline. At NSF 

fee market practices between the lower 

and upper bound projections, the 

proposed rule would generate indirect 

benefits to consumers through the same 

changes, though these benefits would be 

proportionally smaller in size than 

under the upper bound projection. 

If the prohibition on NSF fees induces 

some financial institutions to allow 

additional transactions that they would 

have declined to go into overdraft, it 

could also benefit consumers relative to 

the baseline in instances where a 

consumer had a transaction declined, 

and they were assessed an NSF fee of 

the same amount as the overdraft fee. If 

the potential NSF fee is less than the 

potential overdraft fee, whether 

consumers benefit will depend on the 

consumers’ valuation of the goods they 

were purchasing or attempting to 

purchase net of the price of the good(s). 

Whether this benefit is as large as the 

benefit the consumer receives if their 

transaction is declined but they are not 

assessed an NSF fee will depend on the 

consumer’s valuations and the relative 

size of the NSF and overdraft fees. 

These indirect benefits would accrue to 

consumers only under NSF fee market 

practice projections that predict a 

positive number of NSF fees on covered 

transactions. 

Behavioral Effects 

To the extent covered financial 

institutions would have charged NSF 

fees on covered transactions under the 

baseline, the proposed rule could 

generate changes in the behaviors of 

consumers or covered persons. One 

possibility is that a prohibition on NSF 

fees could make consumers less willing 

to exert effort to get information on their 

account balance prior to making 

purchases and therefore could increase 


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172 In the context of acquiring information about 

account balances, this could be the case if 

consumers incur certain fees for checking balances 

at ATMs, if ATMs or financial institution branches 

are sufficiently far from where consumers live, or 

consumers lack access to their financial accounts 

online or through mobile applications. 

173To gauge the size of potential fees that 

financial institutions would need to assess to fully 

replace the hypothetical revenue they lose from the 

proposed prohibition on NSF fees at the upper 

bound projection for future NSF fee market 

practices, the CFPB used the data from the eight 

financial institutions included in the most recent 

Supervisory Information Request. The CFPB 

calculated the NSF fee revenue per account that 

each financial institution reported in 2022, divided 

this amount by 12 and multiplied by the estimated 

ratio of covered to non-covered transactions from 

the 2021 FRPS data to get a monthly account fee 

that financial institutions would need to assess to 

replace the revenue they would hypothetically lose 

under the proposed rule. On average across the 31 

checking products in the data, this monthly account 

fee would need to be $0.20 per account to replace 

the lost revenue from hypothetical NSF fees on 

covered transactions at the upper bound projection 

for NSF fee market practices. Consumers would 

then benefit less from the proposed rule if they 

were required to pay additional monthly account 

fees (or other similar fees). We caution that this is 

likely to overstate the monthly fee size needed to 

replace NSF fee revenue because of the five 

financial institutions that eliminated NSF fees 

during 2022 that collected a positive amount of NSF 

fee revenue in 2022. As these financial institutions 

have already stopped charging NSF fees, they 

would not need to replace any NSF fee revenue lost 

under the proposed rule. 

174Overdraft and NSF Report at 17 tbl. 6. 175See CFPB October 2023 Data Spotlight. 

the likelihood of NSF transactions for 

some consumers. However, the CFPB 

can find little evidence to support the 

existence of a deterrent effect of NSF 

fees on the prevalence of NSF 

transactions. Based on data on NSF fees 

on transactions of all types from seven 

of the eight financial institutions that 

submitted data, after controlling for 

month-specific and financial institutionspecific differences in the number of 

NSF transactions, the number of NSF 

transactions financial institutions report 

after decreasing or eliminating NSF fees 

decreased, on average, for the five 

financial institutions that made a 

change during the reporting period. This 

is consistent with the costs of avoiding 

NSF fees being sufficiently high for 

consumers at risk of NSF transactions 

that a change in NSF fee size does not 

result in a meaningfully different 

amount of optimal effort put towards 

avoiding these fees,172 or with 

consumers not being aware of the 

possibility or size of NSF fees. The 

CFPB caveats that the NSF fees and 

transactions observed in the data are 

likely to have occurred primarily on 

non-covered transactions and it is 

possible that the relationship between 

NSF transactions and NSF fee sizes 

could be different if we were able to 

estimate it using only information on 

covered transactions and fees. Similarly, 

data that cover a longer period after a 

reduction in NSF fees would allow for 

the consideration of medium- and longterm deterrent effects of NSF fees. The 

data available to the CFPB only permit 

the consideration of effects that are 

observable less than twelve months after 

an NSF fee reduction. Nevertheless, the 

CFPB seeks comment on the potential 

deterrent effect of NSF fees on NSF 

transactions, including data and 

information that could help inform our 

understanding of this relationship. 

Another possibility is that a 

prohibition on NSF fees could reduce 

expected revenue for the consumer 

segments most likely to incur NSF fees 

on covered transactions under NSF fee 

market practice projections above the 

lower bound, and result in financial 

institutions being less willing to open 

depository accounts for those 

consumers. This would decrease the 

benefits to the consumer segments that 

lose access to depository accounts that 

they would have had under the baseline 

and those NSF fee market projections. 

Last, financial institutions could 

respond to the proposed rule by 

offsetting the NSF fee revenue that they 

would earn under projections above the 

lower bound with changes in other 

account fees or prices. These increases 

in other account fees or prices would 

decrease the benefits to consumers from 

the proposed rule.173 Consumers with 

accounts that are assessed a greater 

value of new fees than they would have 

been assessed in NSF fees will benefit 

less from the proposed rule. 

Distribution of Consumer Impacts 

NSF transactions and fees are more 

likely for consumers with limited 

resources. Information from the eight 

financial institutions that responded to 

the CFPB’s supervisory information 

request suggest that NSF transactions 

occurred 20 times as often on consumer 

accounts with low average daily 

balances (below $500) as for consumer 

accounts with high average daily 

balances (above $1,500).174 NSF fees are 

11 times as likely to be assessed on lowbalance consumer accounts as on highbalance consumer accounts. 

2. Potential Benefits and Costs to 

Covered Persons 

For covered persons, the costs and 

benefits are, in general, the opposite of 

the benefits or costs to their customers, 

as detailed above, and net of offsetting 

changes. Any decrease in fees paid by 

consumers will result in an equally 

sized decrease in revenue for covered 

persons. Any increase in fees paid by 

consumers due to offsetting fees 

assessed by covered financial 

institutions will result in an equally 

sized increase in revenue for covered 

persons. 

Additional potential costs to covered 

persons are the legal and personnel 

costs of reviewing current policies and 

pricing strategies to determine whether 

existing policies are compliant and 

whether to re-optimize behavior after 

considering the proposed rule. Given 

that the CFPB understands that NSF fees 

today are rarely charged on covered 

transactions, any such costs should be 

small, as current policies are generally 

consistent with the proposed rule’s 

requirements. Some of these costs might 

be incurred by covered financial 

institutions due to the Overdraft 

Proposed Rule, regardless of whether 

the proposed rule takes effect. 

As was the case above for consumers, 

for the baseline at the lower bound 

projection for NSF fee market practices, 

the proposed rule would generate few 

benefits, costs, or impacts for covered 

persons. 

At levels above the lower bound 

projection, the proposed rule will have 

distinct benefits, costs, and impacts on 

covered persons, depending on whether 

financial institutions charge NSF fees on 

covered transactions. 

Based on a CFPB analysis of publicly 

available Call Report data and publicly 

available information regarding banks’ 

NSF practices, a majority of NSF fees 

have been eliminated among banks with 

at least $1 billion in total assets.175 The 

CFPB report estimates that nearly threefourths of the 75 banks with the highest 

combined NSF and overdraft revenue in 

2021 have since stopped charging NSF 

fees. A similar analysis of NSF fee 

practices among banks with over $10 

billion in assets estimates that twothirds of those institutions have 

eliminated NSF fees. These findings 

suggest that a growing share of covered 

persons no longer charge NSF fees of 

any kind. These differences in NSF fee 

policies across covered persons could 

persist for covered transactions in the 

baseline. That is, some covered persons 

are likely to be charging NSF fees on 

covered transactions while other 

covered persons will not be charging 

NSF fees on covered transactions. To 

the extent that this behavior follows 

similar patterns as the currently 

observed decisions to charge NSF fees 

on non-covered transactions, the 

analysis suggests that smaller financial 

institutions may be less likely to not 

charge NSF fees on covered transactions 

than larger financial institutions. 

However, it is also possible that the 


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176See FRB 2021 Interchange. Furthermore, as 

this estimate is based on the cost of handling 

authorized debit card transactions, the CFPB 

expects that the corresponding estimate for 

declined transactions would be smaller. 

177Based on CFPB market monitoring activity 

conducted between December 2022 and August 

2023, the median institution-level NSF fee among 

banks and credit unions charging NSF fees with 

more than $10 billion in total assets was $32. 

Including information from smaller financial 

institutions would change this estimate, but likely 

not by much, given that the already-included, larger 

financial institutions will be the source of most feed 

NSF transactions. Still, even if between $16.2 

million and $64.6 million in NSF fee revenue were 

charged on covered transactions and if the feed 

transaction-level median NSF charged were to drop 

to $25, it would imply there were between 648,000 

and 2,584,000 feed, covered NSF transactions in 

2022 and the allowed cost recovery would be 

between $3,240 and $12,920. 

178See Overdraft and NSF Report at 16, 17 tbl. 

6. 

covered financial institutions that have 

eliminated NSF fees on non-covered 

transactions could opt to start charging 

NSF fees on covered transactions under 

market scenarios above the lower bound 

projection. 

For covered persons that are not 

charging NSF fees on covered 

transactions, the proposed rule would 

likely generate smaller costs and 

benefits. 

For covered persons that are charging 

NSF fees on covered transactions or that 

would charge them under the baseline, 

the proposed rule would impose costs 

equal to the loss in NSF revenue due to 

the prohibition on NSF fees on covered 

transactions, net of any offsetting 

revenue increases from new fees. If 

future annual NSF fees from covered 

transactions represented between 5 and 

20 percent of current total 2022 NSF 

revenue, the cost borne by covered 

persons charging NSF fees on covered 

transactions would be between $16.2 

million and $64.6 million. 

As mentioned above, the direct 

benefits, costs, and impacts on covered 

persons are likely to be the opposite of 

those discussed for consumers. 

However, for some of the potential 

indirect impacts, this may not be the 

case. For example, consumers may 

benefit from a reduced probability that 

an NSF fee would bring their account 

balance below zero and cause their 

account to be closed or their 

information to be furnished to a 

checking account reporting company. 

For covered financial institutions, these 

indirect impacts do not represent costs, 

and they may represent benefits as they 

no longer need to incur the costs 

associated with closing these depository 

accounts or furnishing information to 

checking account reporting companies. 

Similarly, if the prohibition on NSF 

fees induces some financial institutions 

to not offer depository accounts to the 

consumer segments most likely to incur 

NSF fees on covered transactions, it 

could impose a cost on consumers in 

those segments who may find it more 

difficult to access a depository account. 

This would also impose a cost on the 

covered financial institutions that are no 

longer willing to offer these accounts, 

with the cost being equal to the 

expected revenue on the depository 

accounts they would have opened for 

these consumer segments under the 

baseline and NSF fee market projection, 

but which they are no longer willing to 

open under the proposed rule. 

Any indirect effects for covered 

financial institutions from allowing 

additional transactions to go into 

overdraft are likely to be small and will 

depend on the relative size of expected 

revenue and cost from charging an 

overdraft fee compared to charging an 

NSF fee. 

3. Benefits and Costs of Potential 

Alternative of Permitting Fees That 

Cover Costs of Processing NSF 

Transactions 

The CFPB considered proposing an 

alternative in which financial 

institutions would be permitted to 

charge fees on covered transactions that 

are limited to the cost of handling NSF 

transactions. Such an alternative would 

have little effect on the estimates 

presented above. Research from the 

Board suggests the average cost of NSF 

handling was just $0.005 in 2021 and 

this has remained relatively stable since 

2011.176 If the CFPB assumes $32 per 

NSF fee along with our projections for 

future NSF fee revenue from covered 

transactions that correspond to between 

5 and 20 percent of current annual NSF 

fee revenue,177 wherein the proposed 

rule would result in between $16.2 

million and $64.6 million in reductions 

in NSF revenue, this would represent 

between 506,250 and 2,018,750 NSF 

fees. At $0.005 per NSF fee, this would 

imply between $2,531 and $10,094 in 

total costs for financial institutions to 

handle NSF transactions that generated 

fees. The CFPB can also use the 

information requested from eight very 

large financial institutions in a 

supervisory capacity to adjust this 

number given that the eight institutions 

represented in the data assessed NSF 

fees on 13.4 percent of NSF 

transactions.178 To account for the costs 

of NSF transactions that did not 

generate fees, the range of $2,531 to 

$10,094 in NSF handling cost totals can 

be inflated based on the number of feegenerating transactions by 1/0.134, to 

estimate that the total allowed cost 

recovery for financial institutions from 

their handling of NSF transactions 

would be between $18,888 and $75,328. 

The remaining benefit to consumers 

from reduced NSF fees after accounting 

for allowed cost recovery for financial 

institutions at between 5 and 20 percent 

of the upper bound projection for NSF 

fee practices would be between 

$16,181,112 and $64,524,672. As was 

the case above, these also represent the 

costs to covered persons after 

accounting for allowed cost recovery if 

NSF fees on covered transactions were 

assumed to be responsible for between 

5 and 20 percent of projected annual 

NSF revenue. 

F. Potential Specific Impacts of the 

Proposed Rule on Depository 

Institutions and Credit Unions With $10 

Billion or Less in Total Assets, As 

Described in Section 1026 

Existing data do not clearly indicate 

whether there would be specific impacts 

of the proposed rule on depository 

institutions and credit unions with $10 

billion or less in total assets that are 

different from the impacts on other 

affected financial institutions. As 

mentioned above, smaller financial 

institutions were less likely to have 

eliminated NSF fees as of 2022. If these 

institutions are more likely to have 

started charging NSF fees on covered 

transactions under an NSF fee market 

projection, they may be more likely to 

see NSF fee revenue decrease under the 

proposed rule relative to the baseline. 

However, whether there are specific 

impacts on depository institutions and 

credit unions with $10 billion or less in 

assets may also depend on interactions 

with the Overdraft Proposed Rule. The 

Overdraft Proposed Rule only applies to 

depository institutions with more than 

$10 billion in total assets. If financial 

institutions impacted by the Overdraft 

Proposed Rule are those most likely to 

charge NSF fees on covered transactions 

under the baseline, it would imply that 

depository institutions and credit 

unions with $10 billion or less in total 

assets may be less likely to be impacted 

by the proposed rule. Thus, whether 

there are specific impacts on depository 

institutions and credit unions with less 

than $10 billion in total assets will 

depend on which institutions opt to 

start charging NSF fees on covered 

transactions and, possibly, on 

interactions between the proposed rule 

and the Overdraft Proposed Rule. 

G. Potential Specific Impacts of the 

Proposed Rule on Consumer Access to 

Credit and on Consumers in Rural Areas 

The CFPB does not anticipate that the 

proposed rule will have any negative 

effects on consumer access to credit 


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179See FDIC 2021 Survey. 

180See Consumer Fin. Prot. Bureau, Data 

Spotlight: Challenges in Rural Banking Access, at 

7–10 (Apr. 2022), https://files.consumerfinance.

gov/f/documents/cfpb_data-spotlight_challenges-inrural-banking_2022-04.pdf. 

181See Natalie Cox et al., Financial Inclusion 

Across the United States (Apr. 24, 2023), https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=3934498 (identified the unbanked in the 

universe of tax records as those not listing an 

account for rebates or payment over a ten-year 

period, focusing on the 50–59-old population in 

2019. The Census links ZCTAs to an urban area (or 

none)). 

182Calculations based on publicly available 

FFIEC Call Report data from 2022 suggest that only 

11.9 percent of reporting financial institutions with 

total assets below $2 billion had combined revenue 

from overdraft and NSF fees on depository 

consumer accounts that exceeded two percent of 

their total revenue. In the past, the CFPB has 

estimated that NSF fees make up less than 20 

percent of combined overdraft and NSF revenue. 

Since NSF fees on covered transactions are likely 

to represent less than half of combined overdraft 

and NSF revenue, this suggests that less than 12 

percent of reporting banks would expect a decline 

in revenue of even 1 percent, suggesting that the 

rule would not have a significant impact on a 

substantial number of small entities. The CFPB 

caveats that this calculation relies on data from 

reporting financial institutions with between $1 

billion and $2 billion in total assets to make 

projections about financial institutions with below 

$850 million in total assets. 

under the baseline. To the extent that 

some financial institutions respond to 

the proposed rule by increasing the 

likelihood that they allow transactions 

to go into overdraft, the proposed rule 

could result in increased credit access 

for some consumers. 

The CFPB does not have depository 

account-level data with geographic 

identifiers that would allow us to 

measure NSF fees assessed on 

consumers in rural areas. However, 

existing research suggests that 

consumers in rural areas are more likely 

to be unbanked 179 and more likely to 

live in a bank desert.180 This lower 

access to depository accounts could 

mean consumers in rural areas are less 

likely than consumers in other areas to 

pay NSF fees on covered transactions, 

which could decrease the potential 

benefits to consumers in rural areas of 

the proposed rule. 

The CFPB has also calculated the 

share of the unbanked in the lowest fifth 

of the income distribution in ZIP codes 

that the U.S. Census Bureau classifies as 

urban, rural, and mixed.181 Seventy-four 

percent of consumers in the lowest 

income quintile in both urban and rural 

ZIP codes have a bank account. This 

would suggest that lower-income 

consumers in urban and rural areas have 

similar access to bank accounts and may 

also see similar benefits from the 

proposed rule. 

VII. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (RFA) 

generally requires an agency to conduct 

an initial regulatory flexibility analysis 

(IRFA) and a final regulatory flexibility 

analysis of any rule subject to noticeand-comment rulemaking requirements 

unless the agency certifies that the rule 

will not have a significant economic 

impact on a substantial number of small 

entities. The CFPB is also subject to 

specific additional procedures under the 

RFA involving convening a panel to 

consult with small business 

representatives before proposing a rule 

for which an IRFA is required. An IRFA 

is not required for this proposal because 

the proposal, if adopted, would not have 

a significant economic impact on a 

substantial number of small entities. 

Small institutions, for the purposes of 

the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) of 

1996, are defined by the Small Business 

Administration. Effective December 19, 

2022, depository institutions with less 

than $850 million in total assets are 

determined to be small. 

As mentioned above, the CFPB 

understands that covered persons rarely 

currently charge NSF fees on covered 

transactions. As a result, under current 

market practices the proposed rule 

should not have a significant impact on 

a substantial number of small entities. 

Moreover, even when combined with 

overdraft fees, total NSF fees generally 

represent well under 2 percent of total 

revenue at the smallest financial 

institutions that regularly report this 

information, suggesting that any 

potential reduction in NSF fee revenue 

would not be likely to have a significant 

impact on institutions with less than 

$850 million in total assets.182 As a 

result, the proposed rule should not 

have a significant impact on a 

substantial number of small entities 

even if NSF revenue were entirely 

comprised of NSF fees on covered 

transactions. 

Accordingly, the Director hereby 

certifies that this proposal, if adopted, 

would not have a significant economic 

impact on a substantial number of small 

entities. Thus, neither an IRFA nor a 

small business review panel is required 

for this proposal. 

VIII. Paperwork Reduction Act 

Under the PRA, the CFPB may not 

conduct or sponsor and, 

notwithstanding any other provision of 

law, a person is not required to respond 

to an information collection unless the 

information collection displays a valid 

control number assigned by OMB. 

The CFPB has determined that the 

proposed rule would not impose any 

new information collections or revise 

any existing recordkeeping, reporting, or 

disclosure requirements on covered 

entities or members of the public that 

would be collections of information 

requiring approval by the Office of 

Management and Budget under the 

Paperwork Reduction Act. 

The CFPB has a continuing interest in 

the public’s opinions regarding this 

determination. At any time, comments 

regarding this determination may be 

sent to: Consumer Financial Protection 

Bureau (Attention: PRA Office), 1700 G 

Street NW, Washington, DC 20552, or by 

email to CFPB_Public_PRA@cfpb.gov. 

List of Subjects in 12 CFR Part 1042 

Banks, banking, Consumer protection, 

Credit, Credit unions, Electronic funds 

transfers, National banks, Savings 

associations, Trade practices. 

■ For the reasons set forth in the 

preamble, the CFPB proposes to add 

part 1042 to chapter X in title 12 of the 

Code of Federal Regulations, as follows: 

PART 1042—NONSUFFICIENT FUNDS 

FEES 

Sec. 

1042.1 Authority and purpose. 

1042.2 Definitions. 

1042.3 Identification and prohibition of 

abusive practice. 

Authority: 12 U.S.C. 5511, 5512, 5531(b) 

and (d). 

§ 1042.1 Authority and purpose. 

(a) Authority. The regulation in this 

part is issued by the Consumer 

Financial Protection Bureau (CFPB) 

pursuant to the Consumer Financial 

Protection Act of 2010 (CFPA), Public 

Law 111–203, title X, 124 Stat. 1955. 

(b) Purpose. The purpose of this part 

is to identify certain abusive acts or 

practices in connection with certain 

consumer transactions by covered 

financial institutions. 

§ 1042.2 Definitions. 

For the purposes of this part, the 

following definitions apply: 

(a) Account means an ‘‘account’’ as 

defined in Regulation E, 12 CFR 

1005.2(b). 

(b) Covered financial institution 

means a ‘‘financial institution’’ as 

defined in Regulation E, 12 CFR 

1005.2(i). 

(c) Covered transaction means an 

attempt by a consumer to withdraw, 

debit, pay, or transfer funds from their 

account that is declined instantaneously 

or near-instantaneously by a covered 

financial institution due to insufficient 

funds. 

(d) Insufficient funds refers to the 

status of an account that does not have 


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enough money to cover a withdrawal, 

debit, payment, or transfer transaction. 

(e) Nonsufficient funds fee or NSF fee 

means a charge that is assessed by a 

covered financial institution for 

declining an attempt by a consumer to 

withdraw, debit, pay, or transfer funds 

from their account due to insufficient 

funds. The label used by the covered 

financial institution for a fee is not 

determinative of whether or not it is a 

nonsufficient funds fee. 

§ 1042.3 Identification and prohibition of 

abusive practice. 

(a) Identification. It is an abusive 

practice for a covered financial 

institution to charge a nonsufficient 

funds fee in connection with a covered 

transaction. 

(b) Prohibition. A covered financial 

institution must not assess a 

nonsufficient funds fee in connection 

with any covered transaction. 

Rohit Chopra, 

Director, Consumer Financial Protection 

Bureau. 

[FR Doc. 2024–01688 Filed 1–30–24; 8:45 am] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2024–0040; Project 

Identifier MCAI–2023–01196–T] 

RIN 2120–AA64 

Airworthiness Directives; Airbus SAS 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to 

supersede Airworthiness Directive (AD) 

2014–15–09, AD 2020–15–09, and AD 

2022–16–07. AD 2014–15–09 applies to 

all Airbus SAS Model A330–200 

Freighter, A330–200 and –300, and 

A340–200, –300, –500, and –600 series 

airplanes. AD 2020–15–09 applies to all 

Airbus SAS Model A330–941 airplanes. 

AD 2014–15–09 and AD 2020–15–09 

require repetitive operational tests of the 

hydraulic locking function on certain 

spoiler servo-controls (SSCs) and 

replacement if necessary. AD 2022–16– 

07 applies to certain Airbus SAS Model 

A330–200, A330–200 Freighter, and 

A330–300 series airplanes. AD 2022– 

16–07 requires revising the existing 

maintenance or inspection program, as 

applicable, to incorporate new or more 

restrictive airworthiness limitations. 

Since the FAA issued AD 2022–16–07, 

the FAA has determined that new or 

more restrictive airworthiness 

limitations are necessary. This proposed 

AD would continue to require certain 

actions in AD 2014–15–09, AD 2020– 

15–09, and AD 2022–16–07 and would 

require revising the existing 

maintenance or inspection program, as 

applicable, to incorporate new or more 

restrictive airworthiness limitations, as 

specified in a European Union Aviation 

Safety Agency (EASA), which is 

proposed for incorporation by reference 

(IBR). This proposed AD also removes 

Model A340–200, –300, –500, and –600 

series airplanes from the applicability. 

The FAA is proposing this AD to 

address the unsafe condition on these 

products. 

DATES: The FAA must receive comments 

on this proposed AD by March 18, 2024. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

regulations.gov. Follow the instructions 

for submitting comments. 

• Fax: 202–493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

AD Docket: You may examine the AD 

docket at regulations.gov under Docket 

No. FAA–2024–0040; or in person at 

Docket Operations between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. The AD docket 

contains this NPRM, the mandatory 

continuing airworthiness information 

(MCAI), any comments received, and 

other information. The street address for 

Docket Operations is listed above. 

Material Incorporated by Reference: 

• For EASA material that is proposed 

for IBR in this NPRM, contact EASA, 

Konrad-Adenauer-Ufer 3, 50668 

Cologne, Germany; telephone +49 221 

8999 000; email ADs@easa.europa.eu; 

website easa.europa.eu. You may find 

this material on the EASA website at 

ad.easa.europa.eu. 

• For Airbus service information that 

is proposed for IBR in this NPRM, 

contact Airbus SAS, Airworthiness 

Office—EAL, Rond-Point Emile 

Dewoitine No: 2, 31700 Blagnac Cedex, 

France; telephone +33 5 61 93 36 96; fax 

+33 5 61 93 45 80; email 

airworthiness.A330-A340@airbus.com; 

website airbus.com. 

• You may view this service 

information at the FAA, Airworthiness 

Products Section, Operational Safety 

Branch, 2200 South 216th St., Des 

Moines, WA. For information on the 

availability of this material at the FAA, 

call 206–231–3195. It is also available at 

regulations.gov under Docket No. FAA– 

2024–0040. 

FOR FURTHER INFORMATION CONTACT: 

Vladimir Ulyanov, Aviation Safety 

Engineer, FAA, 1600 Stewart Avenue, 

Suite 410, Westbury, NY 11590; 

telephone 206–231–3229; email 

Vladimir.ulyanov@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

The FAA invites you to send any 

written relevant data, views, or 

arguments about this proposal. Send 

your comments to an address listed 

under ADDRESSES. Include ‘‘Docket No. 

FAA–2024–0040; Project Identifier 

MCAI–2023–01196–T’’ at the beginning 

of your comments. The most helpful 

comments reference a specific portion of 

the proposal, explain the reason for any 

recommended change, and include 

supporting data. The FAA will consider 

all comments received by the closing 

date and may amend this proposal 

because of those comments. 

Except for Confidential Business 

Information (CBI) as described in the 

following paragraph, and other 

information as described in 14 CFR 

11.35, the FAA will post all comments 

received, without change, to 

regulations.gov, including any personal 

information you provide. The agency 

will also post a report summarizing each 

substantive verbal contact received 

about this NPRM. 

Confidential Business Information 

CBI is commercial or financial 

information that is both customarily and 

actually treated as private by its owner. 

Under the Freedom of Information Act 

(FOIA) (5 U.S.C. 552), CBI is exempt 

from public disclosure. If your 

comments responsive to this NPRM 

contain commercial or financial 

information that is customarily treated 

as private, that you actually treat as 

private, and that is relevant or 

responsive to this NPRM, it is important 

that you clearly designate the submitted 

comments as CBI. Please mark each 

page of your submission containing CBI 

as ‘‘PROPIN.’’ The FAA will treat such 

marked submissions as confidential 

under the FOIA, and they will not be 

placed in the public docket of this 

NPRM. Submissions containing CBI 


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