NCUA and CFPB Considering Overdraft, Late Fee Proposals

Regulatory agencies provide overview of proposed and final rules under consideration.

Confirming the fears of credit union trade groups, the NCUA and CFPB on Wednesday revealed they are considering proposals that would change the way financial institutions may charge for overdrafts and late payments.

The proposals were included in the fall version of the Unified Agenda of Regulatory and Deregulatory Actions. Twice a year, federal agencies provide a catalog of proposed and final rules they plan to issue. The agencies additionally provide details of potential rules in a “pre-rule” section of the agenda.

The CFPB and President Biden have called overdraft and similar payments “junk fees.” Many Republicans on Capitol Hill and financial trade groups have denounced the use of that term.

NCUA Agenda Priorities

The NCUA issued a proposed rule that would require federal credit unions to establish a timeline of not more than 45 days for a member to either deposit funds or obtain a loan to cover an overdraft. The agency has not issued a final rule on the matter.

Board Chairman Todd Harper has said that credit unions should be as flexible as possible in charging overdraft fees.

The NCUA’s agenda also includes another hot-button issue—climate risks. As expected, the agency said it will issue a request for information about the impact of climate change on the credit union industry.

Additionally, the agency announced it will seek public input “on opportunities to strengthen its supervision and regulation of credit unions’ management of and reporting on the physical and transition risks that may arise from climate change.”

CFPB Agenda Priorities

While some credit unions and banks have limited fees over the past year, the CFPB is nonetheless signaling it may take further action.

In its regulatory agenda, the bureau noted that although many consumer financial services products are regulated by Truth in Lending rules that limit fees, others are not. The agency said it is considering whether to issue a proposed rule to include those products.

The CFPB also revealed other specific ways it may tackle the issue of fees.

For instance, agency officials pointed out that consumers occasionally engage in transactions that exceed their account balances. And sometimes, the depository institutions will pay that transaction, resulting in an overdraft. However, in many situations, the credit union or bank will decline to pay the transaction and charge a non-sufficient fund fee. The CFPB said it is considering whether to address this issue with a rule.

In addition, the bureau is considering whether to issue amendments to the rules implementing the CARD Act, which relate to penalty fees levied by card issuers.

What Else Do the Agendas Cover?

The two agencies also provided details on further issues they may address.

NCUA Proposed Rules

The NCUA said it is considering whether to issue several proposed rules, including proposals that would:

–Implement quality control standards for the use of automated valuation models by mortgage originators and secondary markets. Agency officials said they are working with other banking and housing regulators to form the proposal. The proposed rule also may include a standard on compliance with non-discrimination laws.

–Make changes to the NCUA’s investment rule. “The Board believes there may be certain provisions in part 703 that are overly restrictive and unnecessary from a safety and soundness perspective,” the agency stated. “A revised part 703 would provide federal credit unions with more flexible investment options.”

–Govern decentralized finance and digital assets as they relate to the credit union industry.

–Simplify share insurance regulations by establishing a “trust accounts” category and provide share insurance treatment for all mortgage servicing account balances held to satisfy principal and interest obligations to a lender.

Succession Planning Final Rule

The NCUA also is considering whether to issue a final rule governing succession planning at federal credit unions. “The succession plans will help to ensure that the credit union has plans to fill key positions, such as officers of the board, management officials, executive committee members, supervisory committee members, and (where provided for in the bylaws) the members of the credit committee to provide continuity of operations,” agency officials said.

CFPB Rules in the Works

The CFPB said it is continuing to work on a proposal that would require financial institutions to provide consumers with their personal financial information, explaining that its next step is to convene a panel to assess the impact of the proposal on small businesses.

The bureau also revealed it is working on a final rule regarding the reporting of credit applications made by women-owned, minority-owned, and small businesses. Credit union trade groups have expressed concern about the regulatory burden of such a proposal.