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CFPB Proposes Rule Prohibiting NSF Fees on Transactions Declined in Real Time

The CFPB proposed a rule Wednesday that would consider non-sufficient funds (NSF) fees for transactions declined in real time to be unlawful under the Consumer Financial Protection Act. 

The proposal would prohibit financial institutions from engaging in this practice across all instantaneously declined transactions, regardless of transaction method, including declined debit card purchases, ATM withdrawals, and some declined peer-to-peer payments.

The CFPB acknowledged in its announcement that fees are rarely charged for transactions declined in real time at the swipe, tap or click, but states that its taking a proactive approach because as technology advances, financial institutions may have the capability to decline more transactions in real time.

The announcement comes a week after the CFPB issued a proposal to limit overdraft fees by financial institutions with more than $10 billion in assets, however the rule would likely impact credit unions of all sizes.

The Association is reviewing both proposed rules and will draft comment letters.

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