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February 2024 Regulatory Brief: Junk Fees, Redlining, and Why Congress Can't Stop 1071

author Stephanie Lyon
3 min read
Feb 6, 2024

January brought a blizzard of regulatory news with the Consumer Financial Protection Bureau (CFPB) once again leading the charge. From the Biden administration pushing back on “junk fees” to the Department of Justice’s ongoing Combatting Redlining Initiative, there’s plenty to talk about in this month’s Regulatory Update podcast.

Each month our team tackles the biggest regulatory compliance news, offering our insights into what it means for your financial institution. It’s the same team that constantly updates the regulatory library in our compliance management solution, Ncomply.  

What highlights did we cover for January 2023? Watch the podcast below or read on to find out.

 

CFPB proposes two rules to limit overdraft fees and eliminate junk fees

The CFPB proposed two rules as part of the administration’s push to eliminate junk fees.  

The first proposal, aimed at financial institutions with more than $10 billion in assets (a benchmark that could change in the future), would impose substantial obligations on institutions’ overdraft offerings. Financial institutions that don’t profit off overdraft fees would be able to continue offering them with fewer changes provided they can demonstrate the fee is to cover the cost of the program or by selecting the amount from the pricing benchmark of the rule (details available in the reg update or in Ncomply).

Institutions that profit from overdrafts would see them subject to additional requirements such as Reg Z’s account and advertising disclosure expectations for lines of credit. The likely effective date for this wouldn't be until October 1, 2025. Comments are due April 1.  

The second CFPB proposal would prohibit covered financial institutions from charging insufficient funds fees (NSFs) caused by consumer-initiated payment transactions that are instantly declined. While these types of fees are extremely rare, the CFPB believes the rule will prevent them from becoming more common should technology make it possible for more transactions to be instantly declined. Listen to the podcast to find out how the CFPB is using the UDAAP framework in the proposal and what it might mean for the future.

Senate can’t override president’s Section 1071 rule veto

The Senate couldn’t muster the two-thirds majority it needed to override President Biden’s veto of a congressional resolution that would have blocked implementation of the CFPB’s Section 1071 small business reporting rule. With a national stay still in place, implementation dates depend on how and when the Supreme Court rules on the constitutionality of the CFPB’s funding. A decision is expected in June.

CFPB Takes Aim at Inaccurate Background Check Reports and Sloppy Credit File Sharing Practices

The CFPB issued two advisory opinions on inaccurate background check reports and sloppy credit file-sharing practices. The goal of the advisory opinions is to ensure that consumer reporting systems produce accurate and reliable information and do not keep people from accessing their personal data.

DOJ Continues to push their Combatting Redlining Initiative

The Justice Department shows no sign of cooling its redlining enforcement initiative. It announced a $1.9 million settlement with a $460 million-asset bank in Tennessee to resolve allegations of redlining in majority-Black and Hispanic neighborhoods.

FCC rule impacts financial institution text messages

The FCC issued a final rule that blocks text messages from known sources of illegal texts, includes text messages as part of the Do Not Call Registry, new opt-in standards for email and text, and several other provisions that will impact financial institutions. For a full rundown, listen to the podcast or log into Ncomply.

NCUA releases 2024 Supervisory Priorities

The National Credit Union Administration (NCUA) released its 2024 supervisory priorities. Where will the agency be focusing its attention? 

On the financial side, the NCUA highlighted underwriting standards, liquidity risk, and interest rate risk. For consumer protection, overdraft programs, fair lending, redlining, auto lending, and flood insurance will be in the spotlight.  BSA/AML returned to the list after one year away. There’s also cybersecurity (including the new incident reporting requirement that took effect last September) and a reminder that the NCUA uses its ACET and the FFIEC IT Examination Handbook to review a credit union’s information security program at each exam.

Wondering about the year ahead?

Register for our webinar: 2024 Regulatory Expectations and Enforcement

 

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