At-a-Glance: California’s Overdraft Standards
California Senate Bill 1075, “Credit Unions: Overdraft and Nonsufficient Funds Fees” (Bill 1075) was introduced during the 2023-2024 Regular Session of the California State Legislature. Bill 1075 was signed into law by Governor Gavin Newsom in September 2024, adding a new section (14053) to California’s Credit Union Law (Cal. Fin. Code § 14000 et seq). Under Bill 1075, there were two effective dates, the first was over a year ago – January 1, 2025. The second effective date was more recent - January 1, 2026.
The requirements that took effect last year dealt with notice requirements and aligned with common industry practices. Those requirements are as follows:
Notice Delivery Method:
•Send the notice using the member’s preferred communication channel.
Timing:
•Deliver the notice on the same business day the fee-generating transaction occurs, or by the next business day if same-day delivery is not feasible.
Content of the Notice:
•Transaction date
•Status of the transaction (processed or declined)
•Overdraft amount, if applicable
•Amount required to restore to a positive balance
•Timeframe to avoid potential consequences if the account remains negative
•If applicable, the specific period the member has to return the account to a positive balance.
As a side note, Assembly Bill 2017, “Banks and credit unions: nonsufficient funds fees”, which was also enacted in 2024 and took effect on January 1, 2025, bans both California state-chartered banks and state-chartered credit unions from charging NSF funds fees from instantly declined transactions.
You may recall that the CFPB issued its overdraft proposed rule on January 17, 2024.Under the proposal, large banks and credit unions (defined as institutions with over $10 billion in assets) would be subject to stricter limits and disclosure obligations for overdraft fees. At the end of 2024, the CFPB released its final rule and required large banks and credit unions to either cap overdraft fees at $5, set fees based on actual costs, or treat overdrafts as credit subject to Truth in Lending Act disclosures. The rule was scheduled to take effect on October 1, 2025. However, Congress passed and President Trump signed into law a Congressional Review Act Resolution on May 9, 2025, formally rescinding the rule and nullifying it.
Looking at both the California law and the CFPB’s rescinded rule indicates how states may adjust their regulatory frameworks to address gaps in federal law and regulation-- though doing so can potentially create overlap or duplicate requirements. The California legislation reflects a broader pattern in which states may choose to adopt broad standards in pursuit of stronger consumer protections.
States often lead the way on consumer protection, setting higher standards even when federal action is rescinded or rolled back. Staying informed about rulemakings and legislation is important because policy changes can expand, restrict, or redirect consumer protection standards, and these changes may directly impact credit unions in the state.
For the credit union system, collaboration is our core strength--credit unions, state credit union leagues, and America’s Credit Unions all working together. Collaboration is essential to staying ahead of trends and understanding how legislative or regulatory shifts might broaden, narrow, or reconfigure consumer protection standards. For affiliated credit unions, your state credit union league or association is a great resource for state-specific compliance information. The Compliance Team at America’s Credit Unions is always here to support you, so please reach out to us at compliance@americascreditunions.org with any regulatory questions or concerns you may have.