Account Transaction Fees Under The Microscope in NY and the CFPB

May 14, 2019 at 8:59 am Leave a comment

The bill I’m going to talk about today provides you a sense of how much things have changed in the Legislature now that the democrats are in full control of the senate chamber. Yesterday, the Assembly passed A1940 which is cosponsored by Assemblyman Zebrowski and Senator Sanders, both of whom share their respective Chamber’s Banks Committees. If the senate ultimately passes the bill which is currently on the senate floor and it is signed into law, it will require all state chartered banking institutions to provide members with basic banking accounts who are 65 years of age or older with twelve account transactions a month without incurring a fee.

To understand why I find this bill significant we have to take a trip down memory lane. In 1994, the banking industry successfully lobbied the Legislature to remove interest rate caps on most consumer loans. In return for this concession, banks agreed to provide lifeline banking accounts. This requirement is codified in section 14-F of the banking law which mandates that state chartered banks and credit unions offer low cost banking accounts with certain minimum features including a minimum number of eight free consumer transactions from demand deposit accounts. The goal is to minimize the number of ATM transactions for which a fee is charged. Since at least the late 90’s I have seen legislation in the Assembly that would increase the number of consumer transactions. The bill would even pass sometimes in the Assembly but be ignored by the senate. In other words, legislation which has been bouncing around for over two decades is now alive and well. One question which the legislation raises is how exactly institutions are going to be able to identify transactions being made by senior citizens and increase the number of fee free transactions for that specific group.

CFPB Details Plans For Regulatory Review

It wasn’t too long ago, let’s say 2016, that I would have been less than enthusiastic about an announcement by the CFPB that it was laying the ground work for a ten year review of all the regulations it has promulgated. After all, one of the reasons I became increasingly frustrated by the old regime was that it became increasingly obvious that while it said it was committed to an open minded facts driven approach to regulation, the reality was, it had an ideological agenda and simply used research to confirm its own biases but now under new leadership, I have some good news to report.

Under Section 610 of the Regulatory Flexibility Act, the CFPB is required to review its regulations at least once every ten years to assess their impact on “small entities”. This means that the CFPB will be asking for feedback in the coming year on all of those regulations it has promulgated, taking into account the following considerations:

  1. The continued need for the rule;
  2. The nature of public complaints or comments on the rule;
  3. The complexity of the rule;
  4. The extent to which the rule overlaps, duplicates, or conflicts with Federal, state,or other rules; and
  5. The time since the rule was evaluated or the degree to which technology, market conditions, or other factors have changed the relevant market.

The CFPB also announced that the first regulation it will be reviewing under this framework is none other than the debit overdraft transaction regulations amending regulations which were promulgated by the Federal Reserve and took effect in 2009. These are of course the regulations which require credit unions and banks to get a consumer’s affirmative consent before charging for overdraft protection on ATM transactions. Maybe there’s something we can do about the number of lawsuits this regulation has created? On that note, have a good day.



Entry filed under: New York State, Regulatory. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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