BPI Comments on CFPB’s Proposed Overdraft Rule

Dear Director Chopra:

The Bank Policy Institute[1] is providing these comments in response to the Consumer Financial Protection Bureau’s Notice of Proposed Rulemaking regarding discretionary overdraft products provided by “very large financial institutions,”[2] in which the CFPB proposes sweeping changes to the provisions in Regulation Z regarding fees charged on discretionary overdraft products.[3] In particular, the CFPB proposes to substantively regulate the terms upon which discretionary overdraft products may be offered, including by imposing de facto limits on the fees banks would be permitted to charge on these products. Setting aside whether this regulatory change is good policy, the CFPB lacks legal authority to promulgate such a regulation under the Truth in Lending Act (“TILA”), the statute the CFPB relies upon as the foundation for the Proposed Rule. The Proposed Rule is deficient in multiple other respects as detailed in this letter. The CFPB’s lack of statutory authority is fatal to the Proposed Rule, and the other deficiencies, if left unaddressed in the final rule, would render the rule arbitrary and capricious under the Administrative Procedure Act.

To read the full comment letter, please click here, or click on the download button below.

[1] The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

[2] CFPB, Notice of Proposed Rulemaking, Overdraft Lending: Very Large Financial Institutions, 89 Fed. Reg. 13,852 (Feb. 23, 2024), available at https://files.consumerfinance.gov/f/documents/cfpb_overdraft-credit-very-large-financial-institutions_proposed-rule_2024-01.pdf.

[3] This Proposed Rule follows a series of recent CFPB actions criticizing overdraft and non-sufficient funds (NSF) fees charged by consumer financial services providers. See, e.g., CFPB Blog, Rebecca Borne and Ashwin Vasan, Consumers on course to save $1 billion in NSF fees annually, but some banks continue to charge these fees, (Apr. 13, 2022), available at https://www.consumerfinance.gov/about-us/blog/consumers-on-course-to-save-one-billion-in-nsf-fees-annually-but-some-banks-continue-to-charge-them/; CFPB Blog, Patrick Gibson and Lisa Rosenthal, Measuring the impact of financial institution overdraft programs on consumers, (June 16, 2022), available at https://www.consumerfinance.gov/about-us/blog/measuring-the-impact-of-financial-institution-overdraft-programs-on-consumers/; CFPB, Prepared Remarks of CFPB Director Rohit Chopra on Overdraft Lending Press Call, (Jan. 16, 2024), available at https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-of-cfpb-director-rohit-chopra-on-overdraft-lending-press-call/; CFPB, Supervisory Highlights, Junk Fees Update Special Edition, (Oct. 2023), available at https://www.consumerfinance.gov/data-research/research-reports/supervisory-highlights-junk-fees-update-special-edition-issue-31-fall-2023/