April 4, 2024
MBA Outlines Opposition to CFPB’s Overdraft Proposed Rule
“Illegal, arbitrary and nonsensical” — that’s how MBA described the Consumer Financial Protection Bureau’s proposal to amend Regulations E and Z to update regulatory exceptions for overdraft fees.
As previously shared by MBA, the CFPB’s proposed rule would force banks with more than $10 billion in assets to set overdraft fees in alignment with direct cost or an arbitrary benchmark set by CFPB (proposed in the rule as $3, $6, $7 or $14).
In its comment letter, MBA said the CFPB is attempting to reclassify bank overdraft programs as lending, which violates a federal law that prohibits the CFPB from establishing usury caps. It also violates a federal law that permits national and state-chartered banks to follow the law of their home state for interest and fee limitations.
“The CFPB is effectively overriding two different federal statutes that ensure competitive markets and attempting to fix prices for banking services nationwide,” said MBA General Counsel Keith Thornburg.
MBA said in its comment letter that “these matters are legally unprecedented and raise important legal questions whether the CFPB is acting within the boundaries of its authority and whether the rule stands within the enumerated powers of Congress to delegate to the CFPB. Thus, the CFPB is inviting uncertainty and legal peril to an area of banking where laws have been stable and protective of services and products that banks and their customers have relied on.”
MBA also was among the 52 state bankers associations that joined the American Bankers Association’s comment letter that warned “consumers will lose” if the CFPB’s proposal is finalized. The proposal would lead many banks to stop offering — or significantly reduce access to — overdraft, depriving consumers of a valued and needed form of short-term liquidity. The groups warned that banks that continue to offer overdraft under this framework may reduce or eliminate pro-consumer overdraft features like grace periods and de minimis thresholds for charging an overdraft fee.
“Fewer consumers will have access to low-cost, full-service deposit accounts,” under the proposal, and “those that do will be required to meet higher minimum balance requirements,” the groups said. The CFPB’s proposal is “antithetical to the free-market principles that drive innovation, promote financial inclusion, and provide consumers with a robust set of choices from which they can select the financial products and services that best meet their needs.”
Federal Court Pauses CRA Rule Implementation Following ABA Lawsuit
A federal judge in Texas on Friday issued a preliminary injunction against enforcing new rules implementing the Community Reinvestment Act in a lawsuit brought by the American Bankers Association and other business groups.
MBA previously shared that ABA, the U.S. Chamber of Commerce and five national and state associations sued banking agencies for exceeding their statutory authority with their recent amendments to final rules implementing the CRA. In a lawsuit filed in the Northern District of Texas, the groups asked the court to vacate the rules. They also sought a preliminary injunction preventing the agencies from enforcing the rules while the court decides the merits of the case.
District Court Judge Matthew Kacsmaryk granted the plaintiffs their request to pause implementation of the rules while the case moves forward. Among other things, Kacsmaryk said the plaintiffs had shown that banks would incur substantial and unrecoverable costs if the rules were to be enforced only to be struck down at a later date.
“This injunction is the right move as this case plays out,” said MBA President and CEO Jackson Hataway. “It demonstrates the continuous overreach of these agencies that are stepping beyond their authority.”
The plaintiffs in the case said, “While we strongly support the goals of CRA, the final rules exceeded the banking agencies’ regulatory authority and created disincentives for banks to lend in low- and moderate-income communities that need access to credit the most. We look forward to litigating this matter to a final judgment.”
Save the Date for MBA’s Annual Convention!
Make plans to attend MBA’s 134th Annual Convention this June! Please note that convention will be held Tuesday through Thursday, June 4-6, at the Hilton Branson Landing. Convention kicks off with a golf tournament Tuesday morning, and the chairman’s reception will be held Wednesday evening. A tentative schedule is posted online, as well as links to register and book hotel reservations.