wvbankers.org 10 West Virginia Banker Over the last 20 years, nonsufficient funds (“NSF”) fees and overdraft (“OD”) fees have generated a significant amount of non-interest income at many financial institutions – both large and small. Indeed, the Consumer Financial Protection Bureau (“CFPB”) recently noted that, in 2019, financial institutions realized more than $15.4 billion in revenue from NSF and OD fees, while account maintenance fees only contributed approximately $1 billion. Although NSF/OD fees have generated substantial revenue, they have come at a cost. With various deposit account services (e.g., overdraft payment programs) and internal banking practices (e.g., debit card approval policies, transaction posting orders, etc.), these fees have attracted attention from banking regulators, public interest groups, and lawyers representing consumers. Predictably, these groups have been critical of these fees in general and of bank services and internal banking practices that enhance OD fee income in particular. Class action litigation against financial institutions has resulted in the payment of settlements that collectively exceed $1 billion. Whereas the targets of this costly litigation were once mainly institutions holding billions of dollars in assets, in recent times, institutions of every size have been targeted. In fact, many of the readers of this article will have either personally dealt with such litigation (or threats of such litigation) or will know someone who has. Unfortunately, these cases (or threats to sue unless settlements are paid) are unlikely to stop. Nonsufficient Funds and Overdrafts: “Junk Fees” in an Ever-Evolving Regulatory Landscape By Sandra M. Murphy and Floyd Boone, Bowles Rice LLP At the same time, financial institutions have had to deal with ever-evolving regulatory requirements. Historically, although various regulatory reforms have impacted NSF/OD fee income, they have been manageable and have not been existential threats. More recently, however, there have been signs that profound reforms are on the horizon. Notably, Dec. 1, 2021, the CFPB released two research reports analyzing the revenue generated by OD fees. On that same day, the CFPB’s director, Rohit Chopra, issued prepared remarks commenting on the research reports and announcing three steps being taken by the CFPB: 1. Director Chopra announced that CFPB will take action against any “large financial institutions” violating the law in relation to OD fees. Moreover, Director Chopra noted that the CFPB will also work to reveal the identities of any individuals who directed any illegal activity. Relatedly, Director Chopra stated that the CFPB is considering additional policy guidance outlining unlawful practices. 2. CFPB’s examiners are being directed to prioritize examinations of banks that are “heavily reliant on overdraft.” Director Chopra noted that such institutions can expect “close supervisory attention.” 3. “CFPB will be looking to harness technology in ways that give American families the power to more easily fire poorperforming banks.” This step will be intended to make it
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