America’s Consumer Financial Protection Bureau (CFPB) has proposed a rule that would stop banks charging non-sufficient fund fees for transactions that are declined in real time.
The rule would cover transactions such as declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer payments.
The plan is part of the CFPB’s recently announced war on so-called “junk fees” for basic customer services.
Explaining its reasoning, the bureau says that when someone does not have enough money in their account to cover a transaction, generally one of two things happens: the financial institution extends credit in the form of overdraft to cover the difference and permits the transaction to go through; or it simply declines the transaction for insufficient funds.
Generally, the institution only charges a fee for insufficient funds transactions that are processed and then declined – cheques or electronic authorisations, like ACH transactions.
Financial institutions almost never charge fees for transactions that are declined in real time at the swipe, tap, or click, says the CFPB.
“Specifically, as technology advances, financial institutions may be able to decline more transactions right at the swipe, tap, or click. These transactions include ATM, debit or prepaid card, online transfer, in-person bank teller, and certain person-to-person transactions,” says a statement.