The bureau says in a new circular that banks charging fees to a consumer’s closed account may violate federal law.
05/10/2023 12:15 P.M.
2 minute read
The latest circular from the Consumer Financial Protection Bureau provides an overview for regulators of banks’ actions on consumer accounts that can constitute an unfair act or practice under the Consumer Financial Protection Act.
Based on consumer complaint data, the CFPB says it has observed “that even after a consumer completes all the required steps to close an account, their bank has ‘reopened’ the closed account and assessed overdraft and nonsufficient funds fees,” according to a news release.
The CFPB circulars are issued to a broad set of government agencies responsible for enforcing federal consumer financial law, ACA International previously reported.
The enforcement strategy was launched in May 2022, and the circulars are “policy statements under the Administrative Procedure Act and will be released publicly to increase transparency for the benefit of the public and regulated entities,” according to the bureau.
Topics of CFPB circulars have included online practices known as “dark patterns,” nursing home bills and debt collection.
In the latest circular on bank fees, the CFPB says, “consumers may incur overdraft, nonsufficient funds, or monthly maintenance fees when a closed account is reopened by the bank. This practice may also enable third parties to access a consumer’s funds without consent. If reopening the account overdraws the account, banks may also furnish negative information to consumer reporting companies if consumers do not settle negative balances quickly.”
It asks, “After consumers have closed deposit accounts, if a financial institution unilaterally reopens those accounts to process a debit (i.e., withdrawal, ACH transaction, check) or deposit, can it constitute an unfair act or practice under the Consumer Financial Protection Act?”
The response is yes, according to the bureau: “After consumers have closed deposit accounts, if a financial institution unilaterally reopens those accounts to process debits or deposits, it can constitute an unfair practice under the CFPA. This practice may impose substantial injury on consumers that that they cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition.”
Read the complete circular here.
For related discussion, ACA members can listen to a recent episode of the ACA Huddle: Junk (Fees) in the Trunk—Navigating the CFPB’s Impact on the ARM Industry.