Jan. 26, 2024: CFPB Updates
PUBLISHED
CFPB Issues Nonsufficient Funds Fees NPRM
Today, the CFPB issued the Nonsufficient Funds Fees Notice of Proposed Rulemaking (NSF NPRM), which proposes to prohibit covered financial institutions from charging fees, such as NSF fees, when a consumer initiates certain payment transactions that are instantaneously declined, on the grounds that charging such fees would constitute an abusive practice. The NSF NPRM proposes the term “covered financial institution” have the same meaning as a “financial institution” in existing Regulation E, 12 CFR 1005.2(i).
Comments on the NSF NPRM must be received on or before March 25, 2024.
Read the NSF NPRM here: www.consumerfinance.gov/rules-policy/rules-under-development/nonsufficient-funds-nsf-fees/.
CFPB Proposes Rule to Stop New Junk Fees on Bank Accounts
The Consumer Financial Protection Bureau (CFPB) proposed today to block banks and other financial institutions from one potential source of new junk fee revenue – fees on transactions declined right at the swipe, tap, or click. The proposed rule would prohibit non-sufficient funds (NSF) fees on transactions that financial institutions decline in real time. These types of transactions include declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer payments. The CFPB’s proposal is part of the agency’s proactive approach to protect consumers, and it would cover banks, credit unions, and certain peer-to-peer payment companies.
When a consumer tries to make a payment, but does not have enough money in their account, generally one of two things happens. One outcome is overdraft – the financial institution extends credit to cover the difference and permits the transaction to go through. Generally, the institution charges a fee for the overdraft loan. The other outcome is that the financial institution simply declines the transaction for insufficient funds. Generally, the institution only charges a fee for insufficient funds transactions that are processed and then declined – i.e., checks or electronic authorizations, like Automated Clearing House transactions.
Financial institutions almost never charge fees for transactions that are declined in real time at the swipe, tap, or click. For example, a $100 grocery purchase with a debit card may be declined in real time because the account only has $90. These types of transactions are not processed like Automated Clearing House transactions, and are generally not assessed fees. Read more
The Consumer Financial Protection Bureau (CFPB) and seven state attorneys general sued Strategic Financial Solutions (SFS) and its web of shell companies for running an illegal debt-relief enterprise. The CFPB and state attorneys general also sued the chief architects of the illegal enterprise, Ryan Sasson and Jason Blust. The CFPB and attorneys general allege the enterprise has collected hundreds of millions of dollars in exorbitant, illegal fees from vulnerable consumers. The CFPB and attorneys general filed the suit under seal on January 10, 2024. They are requesting the court to order a stop to the enterprise’s illegal actions, order redress for consumers, and impose a civil money penalty. The seven states joining with the CFPB are Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin.
Strategic Financial Solutions markets itself as providing debt relief services. It has offices in New York City and Buffalo, New York. Ryan Sasson is the chief executive officer of SFS. SFS sits at the top of a web of shell companies and façade law firms, which are controlled by Sasson and fellow scheme architect Jason Blust.
SFS runs an alleged scheme, involving dozens of entities, to dupe consumers and regulators. The company uses third parties to target financially vulnerable consumers with advertisements. The advertisements lead consumers to believe they may qualify for loans to help pay down debts. SFS employees then discuss these loans with consumers over the phone. Though SFS tells most, if not all, consumers that they do not qualify for the advertised loans, SFS encourages consumers to enroll in its debt-relief services. SFS promises that its network of law firms and lawyers will negotiate lower debt amounts.
SFS provides little, if any, debt-relief services. SFS requires customers to make immediate payments into an escrow account. Long before it settles any debts, however, SFS collects the fees from the escrow account. While the illegal fees and false claims of legal assistance leave consumers worse off, Sasson and Blust pad their pockets through their web of shell companies that siphon the fees from the escrow accounts. Read more