CFPB Says Surprise Overdraft and NSF Fees Lead to $120 Million in Refunds

Surprise overdraft and nonsufficient funds (NSF) fees account for a significant portion of the refunds to consumers by companies announced Wednesday (Oct. 11) by the Consumer Financial Protection Bureau (CFPB). 

These refunds of these fees make up $120 million of the total of $140 million included in the announcement. 

The refunds were announced Wednesday, along with several rules and regulations to crack down on junk fees that were detailed by President Joe Biden and the heads of the CFPB and the Federal Trade Commission (FTC).

Junk fees, which have been found to violate the law and erode consumer trust, have become a growing concern in various sectors of the consumer finance market, according to a CNBC report. The CFPB has focused on fees related to deposit accounts, auto loans and remittances. These fees often catch consumers off guard, leading to financial burdens and a loss of trust in financial institutions. 

The CFPB’s investigation uncovered unlawful practices by certain financial institutions, resulting in the $140 million in customer refunds, the report said. While the majority of the refunds are related to surprise overdraft and NSF fees, the report also highlighted other violations, including charges for nonapplicable add-on services for car loans, undisclosed fees and failed remittances for international money transfers.

To combat the problem of junk fees, the CFPB has directed service providers responsible for processing deposit, payment and data services for banks to cease contributing to these violations, per the report.

Additionally, the CFPB has been proactive in informing relevant parties about the requirement to offer free alternatives under financial protection laws, according to the report. For example, the report highlights the need for free alternatives to transaction fees applied to student meal accounts, emphasizing compliance with regulations.

While the report does not name the specific companies involved in the investigation, the CFPB has previously taken enforcement actions against major financial institutions such as Bank of America and Wells Fargo, the report said. Bank of America faced repercussions for repeatedly charging certain fees, while Wells Fargo was penalized for surprise overdraft fees.

When the CFPB fined Bank of America $250 million over junk fees in July, a bank spokesperson told PYMNTS that it no longer charges the fees addressed by the regulator.