Fees & Their Relation to TILA, EFTA, Reg Z, Reg E, & UDAAP

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The Consumer Financial Protection Bureau (CFPB) has issued a circular that addresses overdraft fees, particularly those that are unanticipated by consumers. The circular explains that overdraft fees, as described in the circular, can constitute unfair acts or practices.

Question Presented
Can the assessment of overdraft fees constitute an unfair act or practice under the Consumer

Financial Protection Act (CFPA), even if the entity complies with the Truth in Lending Act

(TILA) and Regulation Z, as well as the Electronic Fund Transfer Act (EFTA) and Regulation E?

Yes, overdraft fee practices must comply with TILA, EFTA, RegulationZ, RegulationE, and the prohibition against unfair, deceptive, and abusive acts or practices in Section 1036 of the CFPA.

In particular, overdraft fees assessed by financial institutions on transactions that a consumer would not reasonably anticipate are likely unfair. These unanticipated overdraft fees are likely to impose substantial injury on consumers that they cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition.

As detailed in the circular, unanticipated overdraft fees may arise in a variety of circumstances. For example, financial institutions risk charging overdraft fees that consumers would not reasonably anticipate when the transaction incurs a fee even though the account had a sufficient available balance at the time the financial institution authorized the payment — sometimes referred to as “authorize positive, settle negative (APSN).”

Review the entire circular here.

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