CFPB Proposes Rule To Close Bank Overdraft Loophole

Regulatory Developments

CFPB Proposes Rule to Close Bank Overdraft Loophole
On January 17, the CFPB issued a notice of proposed rulemaking to limit overdraft fees charged by insured financial institutions with more than $10 billion in assets by closing a loophole that exempted overdraft loans from disclosure provisions of the Truth in Lending Act (TILA) and other consumer protection laws (the Proposed Rule).

The Proposed Rule would, among other changes, amend Regulation Z to treat an institution providing covered overdraft credit as a "creditor," a checking account agreement offered in connection with covered overdraft credit as an "open-end credit plan," and a checking account overdraft fee as a "finance charge." As a result, consumers receiving covered overdraft credit would receive disclosures required under TILA, including account opening disclosures, interest rate and fee disclosures, and periodic statements. A financial institution's overdraft services