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The Consumer Financial Protection Bureau (CFPB) released a proposed rule addressing overdraft fees and disclosures surrounding overdraft services. The proposed rule would treat an overdraft as a loan that would be subject to the Truth in Lending disclosures and similar requirements. The rule would also cap overdraft fees. This is a cause for concern for all Maine credit unions, but there is one silver lining: the CFPB included a provision that limits the scope of the rule to only those financial institutions with over $10 billion in assets, thereby exempting all Maine credit unions.
The rule will now continue through a process, including public comment, that could lead to an implementation date of Oct. 1, 2025, according to an article by David Baumann from Washington Credit Union Daily.
Should the rule be implemented, it will almost certainly force the marketplace to reduce or eliminate overdraft fees, even at smaller exempted institutions. However, the introduction of the exemption for smaller financial institutions will provide some flexibility as smaller institutions make marketplace adjustments. Inclusion of the exemption was partially attributed to advocacy meetings the CFPB had with organizations, including the Maine Credit Union League, during the League’s 2023 Hike the Hill program.
Ellen Parent, Director of Compliance, received a call from a CFPB staff member on Wednesday when the rule was released.
“The staff member I spoke with emphasized the importance of our meetings with CFPB over the years and he acknowledged that the relationship that credit unions have with their members is very different from that of large financial institutions,” said Parent. “While the rule itself remains problematic, even for those exempted credit unions, I am delighted that our conversations made an impact.”
The official text of the rule with the request for comment information can be found here. The comment period on the rule is open through April 1, 2024. Credit unions may submit their own comment letters or are welcome to send their thoughts to Ellen Parent at eparent@mainecul.org for inclusion in the comment letter from the League.
“The announced rule from CFPB represents a silver lining for Maine credit unions and our collective advocacy work,” said Robert Caverly, Vice President of Advocacy & Outreach at the League. “Our message to CFPB during Hike the Hill was clear: over-regulating fees will harm the very financial institutions they claim to support. While we appreciate that CFPB is acknowledging the importance of the relationship between credit unions and their members, serious, unintended consequences remain for all credit unions despite the exemption within the proposed rule.”
The League will continue to monitor further developments.