Proposal on fees for instantly declined transactions raises broad UDAAP interpretation concerns

CFPB Building

The CFPB’s proposal prohibiting certain fees for instantly declined transactions has a broad unfair, deceptive, and abusive acts or practices (UDAAP) approach that concerns America’s Credit Unions, the organization wrote in comments filed with the bureau Monday. The proposal would prohibit covered financial institutions from charging fees, such as nonsufficient funds (NSF) fees, when consumers initiate payment transactions that are instantaneously declined.

“The expansive view of abusiveness espoused in the proposed rule fails to provide the level of clarity that covered entities require to comply with any degree of certainty,” wrote America’s Credit Unions’ James Akin. “America’s Credit Unions urges the Bureau to establish clear rules of the road by issuing formal guidance or additional policy statements that include specific examples, case studies, or objective criteria for each aspect of the abusiveness prong and ultimately, to more clearly define this provision through an official rulemaking process.”

Akin further called for the CFPB to implement a cost-benefit analysis and “reasonable person” standard in its abusiveness guidance to “ensure that valuable financial products and services do not become casualties of an overly broad interpretation of the standard.”

The CFPB noted in a statement announcing the proposal financial institutions “almost never charge fees for transactions that are declined in real time at the swipe, tap, or click,” but that the CFPB is “taking proactive steps to ensure that financial institutions do not impose these fees.”

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