This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

3044 

Vol. 90, No. 8 

Tuesday, January 14, 2025 

1See 85 FR 44382, 44421 (July 22, 2020). 

CONSUMER FINANCIAL PROTECTION 

BUREAU 

12 CFR Part 1042 

[Docket No. CFPB–2024–0003] 

RIN 3170–AB16 

Fees for Instantaneously Declined 

Transactions; Withdrawal of Proposed 

Rule 

AGENCY: Consumer Financial Protection 

Bureau. 

ACTION: Withdrawal of proposed rule. 

SUMMARY: The Consumer Financial 

Protection Bureau (CFPB) is 

withdrawing its proposed rule to 

prohibit banks and other financial 

institutions from charging certain 

nonsufficient funds (NSF) fees, such as 

those for declined debit card purchases, 

Automated Teller Machine (ATM) 

withdrawals, and some person-toperson payments. The CFPB will 

determine whether a more 

comprehensive approach to also 

prohibit NSF fees charged for additional 

types of transactions will better protect 

consumers from potentially unlawful 

fees. 

DATES: The proposed rule published 

January 31, 2024, at 89 FR 6031 is 

withdrawn as of January 14, 2025. 

ADDRESSES: The docket for this 

withdrawn proposed rule is available at 

https://www.regulations.gov/docket/ 

CFPB-2024-0003. 

FOR FURTHER INFORMATION CONTACT: 

George Karithanom, Regulatory 

Implementation and Guidance Program 

Analyst, 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: 

I. Summary 

On January 31, 2024, the Consumer 

Financial Protection Bureau (CFPB) 

published in the Federal Register a 

notice of proposed rulemaking in which 

it proposed to prohibit covered financial 

institutions from charging fees, such as 

nonsufficient funds fees, when 

consumers initiate payment transactions 

that are instantaneously declined. The 

proposed rule preliminarily determined 

that charging such fees would constitute 

an abusive practice under the Consumer 

Financial Protection Act’s (CFPA) 

prohibition on unfair, deceptive, or 

abusive acts or practices. For the 

reasons stated below, the CFPB is 

exercising its discretion to withdraw the 

notice of proposed rulemaking and 

terminate this rulemaking proceeding. 

II. Background 

A. Market Background and Proposed 

Rule 

When a consumer attempts a 

withdrawal, debit, payment, or transfer 

that exceeds the available funds in their 

depository account, a financial 

institution will sometimes decline the 

transaction and charge the consumer a 

fee, often called a nonsufficient funds 

(NSF) fee. Normally, these fees are only 

charged on check or Automated 

Clearing House (ACH) transactions that 

take days to clear, under the theory that 

a fee could deter consumers from 

intentionally attempting payments that 

will be declined in order to obtain a 

product or service from a merchant 

before the transaction is declined. 

Financial institutions have historically 

not charged NSF fees on ATM and debit 

transactions because declinations on 

these types of transactions are instant 

and effectively costless to the financial 

institution, and, because there is no 

chance that the transaction is successful 

for the consumer, there is no moral 

hazard to deter. However, financial 

institutions’ fee practices have been 

rapidly changing in recent years, and 

some nonbank prepaid card providers 

have started charging NSF fees on 

instantly declined transactions despite 

the lack of a meaningful justification for 

the fee. 

The proposal preliminarily concluded 

that it is an abusive practice to charge 

an NSF fee on a transaction that is 

instantaneously declined because such 

fees take unreasonable advantage of 

consumers’ lack of understanding of the 

risks, costs, or conditions of their 

accounts at the time they are initiating 

covered transactions. In making this 

preliminary conclusion, the CFPB 

observed that, unlike the CFPA’s 

unfairness prohibition, the statutory text 

for the abusive conduct prohibition does 

not require any inquiry into reasonable 

avoidability. Although the CFPB 

preliminarily found that consumers’ 

lack of understanding that they would 

be charged an NSF fee in the 

circumstances addressed in the proposal 

is generally reasonable, the proposal 

noted that the statutory text of the 

prohibition does not require a finding 

that the consumer’s lack of 

understanding was reasonable to 

demonstrate abusive conduct. 

The CFPB 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. The proposed rule stated 

that the ‘‘costs’’ associated with a 

covered transaction that would result in 

an NSF fee would primarily be the 

amount of the fee itself. The proposal 

further stated that 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. At the 

time a consumer considers initiating a 

request to withdraw, debit, pay, or 

transfer funds from their account, the 

proposed rule explained, the relevant 

risks to the consumer would include the 

possibility the transaction will be 

declined and result in an NSF fee. 

The CFPB preliminarily declined to 

characterize consumers’ lack of 

understanding in the proposal as either 

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

binary framework—used in the 2020 

partial rescission of the CFPB’s 2017 

rulemaking on Payday, Vehicle Title, 

and Certain High-Cost Installment 

Loans 1–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. As 

discussed in the proposal, 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 


khammond on DSK9W7S144PROD with PROPOSALS
Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 3045 

2See Statement of Policy Regarding Prohibition 

on Abusive Acts or Practices (Abusive Policy 

Statement), 88 FR 21883, 21886 (Apr. 12, 2023). 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.’’). 

3Abusive Policy Statement, 88 FR 21883 at 

21886. 

4See generally 2023 Abusive Policy Statement (in 

discussing background and legislative history 

regarding CFPB’s authority to address abusive 

conduct, stating ‘‘. . . Congress concluded that the 

manner in which agencies had enforced the 

prohibitions on unfair and deceptive acts or 

practices was too limited to be effective at 

preventing the financial crisis, and once again 

amended existing law to better meet new 

challenges). 

5As the 2023 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; 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 of those conditions.5

6CFPA section 1031(b), 124 Stat. 2005–2006 (12 

U.S.C. 5531(b)). 7 Id. 

8 12 U.S.C. 5531(d). For a more detailed 

discussion of the CFPB’s authority under the 

abusive conduct prohibition, see Abusive Policy 

Statement, 88 FR 21883. 

many are harmed, they are more likely 

to understand that they are likely to be 

harmed. 

The CFPB preliminarily concluded in 

the proposed rule 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. The CFPB explained that a 

determination of unreasonable 

advantage-taking involves an evaluation 

of the facts and circumstances that may 

affect the nature of the advantage and 

the question of whether the advantagetaking was unreasonable under the 

circumstances.2 The proposal also 

stated 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.3

B. Statutory History 

Congress passed the prohibition on 

abusive conduct after the 2007–2008 

financial crisis, recognizing that the 

unfairness and deception prohibitions 

were insufficient to prevent predatory 

mortgage lending.4 The statutory 

authority to regulate abusive conduct 

was explicitly added as a new standard 

of fair dealing, and Congress crafted the 

prohibition as separate and distinct 

from unfairness and deception.5

The prohibition, 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.’’ 6 CFPA section 1031(b) further 

provides that rules under section 1031 

may include requirements for the 

purpose of preventing such acts or 

practices.7

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.8

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. 

Comments Received 

The CFPB received nearly 8,000 

comments on the proposed rule. 

Commenters supported and opposed the 

proposed rule on various grounds. A 

coalition of consumer advocacy groups 

and a number of think tanks, 

individuals, financial institutions, 

financial institution employees, and 

State and local governmental agencies 

supported the proposed rule. Some 

comments supporting the rule stated 

that: NSF fees (including those not 

covered by the proposal) have a 

particular impact on financially 

vulnerable populations; the proposal 

would simply codify the existing 

practice of most financial institution 

that do not charge NSF fees for 

instantaneously declined transactions; 

the proposal correctly described the 

CFPB’s statutory abusive conduct 

authority; and the proposal properly 

applied that authority to prohibit NSF 

fees for covered transactions. A number 

of commenters supporting the proposal 

asserted that the discussion of lack of 

understanding in the proposal was 

consistent with that of the 2023 Abusive 

Policy Statement, agreed that the 

abusive conduct prohibition was a 

separate and distinct statutory tool from 

unfairness and deception and asserted 

that the insertion of a reasonable person 

standard in the lack of understanding 

prong of the abusive conduct 

prohibition would be statutorily 

inappropriate. 

A number of the supportive 

comments stated that the proposed rule 

would help to protect consumers from 

abusive conduct, but cited evidence of 

current harm to consumers from NSF 

fees beyond the scope of the proposed 

rule, such as the impact on consumers 

of NSF fees for check, ACH and 

recurring debit fee transactions. One 

commenter stated that 87% of 

Americans surveyed believe that NSF 

fees of any kind—including fees not 

covered by the proposed rule—are 

unfair. Others reasoned that financial 

institutions generally should not profit 

from consumer misfortune. One 

commenter highlighted the impact of 

NSF fees charged for recurring debit 

transactions, especially for those on 

fixed incomes. Similarly, several other 

commenters inquired as to whether the 

proposed abusive conduct analysis of 

the rule, focused as it was on NSF fees 

for instantaneously declined 

transactions, might not also apply to 

NSF fees for other transactions not 

covered by the rule, including check 

and ACH transactions. 

A number of trade groups, financial 

institutions (including banks, credit 

unions, and non-depositories), 

employees of financial institutions, 

individuals, a group of law students, 

and others opposed the proposed rule. 

Their comments challenged provisions 

such as: the scope of the rule; the 

background analysis of the CFPB’s 

statutory abusive conduct authority; the 

application of that authority to NSF fees 

for covered transactions; the lack of 

prevalence of NSF fees covered by the 

rule; the preventive nature of the rule; 

the alleged potential impact to 

innovation in the industry; and the 

alleged potential cost of the rule, even 

to the institutions that do not charge 

NSF fees covered by the rule. 

Although the CFPB is not finalizing 

the proposed rule, it affirms its 

interpretation of the CFPA with respect 

to its authority as discussed in the 2023 

Policy Statement and disagrees with the 

comments that argued against it. As a 

general matter, the CFPB received 

comments about the agency’s reading of 

its abusive authority and the application 


khammond on DSK9W7S144PROD with PROPOSALS
3046 Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules 

to instantaneous NSF fees. Commenters 

discussed the CFPB’s reading of the 

abusive standard, but those comments 

raised mostly policy-based concerns and 

did not seriously grapple with the 

CFPB’s interpretation of the statutory 

language. For example, commenters did 

not give a plausible, much less superior, 

alternative textual readings of the 

abusive standard that justified imputing 

the ‘‘reasonable consumer’’ test for 

unfair practices to the statutory lack of 

understanding standard. Commenters 

did not suggest that lack of 

understanding of ‘‘costs’’ or 

‘‘conditions’’ require, as a textual 

matter, an assessment of probabilities or 

likelihood or magnitude of harm. And 

commenters did not raise specific 

counter-arguments supporting the 

notion that the CFPB should, statutorily, 

only pursue regulations under its 

abusive authority if consumers lack 

understanding of ‘‘general’’ risk, as 

opposed to when consumers lack 

understanding of individual risks, costs, 

or conditions. 

Commenters did suggest that the 

CFPB’s reading of the statute as 

prohibiting practices distinct from those 

prohibited by the unfairness and 

deception standards would have broad 

policy consequences. However, 

Congress has already spoken on these 

issues of policy; the legislative history 

and statutory text make clear that 

Congress intended the existence of an 

additional and distinct standard 

prohibiting abusive practices. 

Furthermore, the CFPB does not agree 

that law-abiding companies have to be 

allowed to take unreasonable advantage 

of consumer’s lack of understanding in 

order to operate in a fair market 

economy. While consumers may not be 

expected to understand every element of 

a financial transaction, law-abiding 

companies do not take unreasonable 

advantage of a lack of understanding to 

profit unreasonably. For that reason, the 

CFPB continues to operate with an 

understanding of the abusive conduct 

standard consistent with the 2023 

Abusive Policy Statement as well as the 

clarifications with respect to the payday 

rule discussed in the proposal. 

III. Withdrawal of the Proposed Rule 

The proposed rule would have 

applied the analysis summarized above 

in section II.A. only to NSF fees charged 

for transactions that were 

instantaneously or nearly 

instantaneously declined. The stated 

purpose for this limited-scope proposal 

was that because technological advances 

might eventually make instantaneous 

payments ubiquitous, it was important 

to proactively set regulations to protect 

consumers from abusive practices that 

could emerge. 

However, as explained above, a 

number of comments highlighted that 

NSF fees for transactions not covered by 

the rule could also be abusive, such as 

fees for recurring Automated Clearing 

House (ACH) transactions. These fees 

are much more common under current 

market conditions than fees on 

instantaneous payments. Some 

comments suggested that the proposed 

abusive conduct analysis be extended to 

transactions not covered by the 

proposed rule. 

In light of the comments received and 

upon further consideration, the CFPB 

has reason to believe that practices 

involving the charging of NSF fees on 

other types of transactions may also be 

abusive for reasons similar to those 

discussed in the proposal. However, the 

prevalence, nature, and extent of harms 

from these non-instantaneous NSF fees 

were outside of the scope of the 

proposal and were not the focus of the 

proposed rule’s evidence or analysis. 

Accordingly, the CFPB has determined 

that it would be a prudent use of its 

rulemaking and market monitoring 

resources to withdraw this rulemaking 

and to consider whether consumers 

similarly lack understanding of other 

NSF fees to determine whether a 

broader rulemaking would be 

appropriate. 

IV. Applicable Date 

The notice of proposed rulemaking 

published in the Federal Register at 89 

FR 6031 on January 31, 2024, is 

withdrawn as of January 14, 2025. 

Authority and Issuance 

For the reasons set forth above, the 

CFPB uses its discretion to withdraw 

the proposed rule on NSF fees for 

instantaneously declined transactions 

published in the Federal Register on 

January 31, 2024. 

Rohit Chopra, 

Director, Consumer Financial Protection 

Bureau. 

[FR Doc. 2024–31385 Filed 1–13–25; 8:45 am] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2024–2555; Project 

Identifier AD–2024–00214–R] 

RIN 2120–AA64 

Airworthiness Directives; Siam Hiller 

Holdings, Inc, Helicopters 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for 

Siam Hiller Holdings, Inc. (Siam Hiller), 

Model UH–12E (Army OH–23G and H– 

23F) and UH–12E–L helicopters. This 

proposed AD was prompted by reports 

of cracks found in a main rotor (M/R) 

transmission drive shaft (drive shaft). 

This proposed AD would require 

inspecting certain M/R drive shafts for 

a crack, prohibit installing certain M/R 

drive shafts unless the inspection is 

done, and prohibit using certain paint 

removers. 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 February 28, 

2025. 

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–2024–2555; 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, any comments 

received, and other information. The 

street address for Docket Operations is 

listed above. 

Other Related Material: For Hiller 

Aircraft Corporation material identified 

in this proposed AD, contact Hiller 

Aircraft Corporation, 925 M Street, 

Firebaugh, CA 93622; phone: (559) 659– 

5959; or website: hilleraircraft

corporation.com/. 


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