Biden regulators target transaction-declined fees, considered another type of bank 'junk fee'

abcnews.go.com:

The Biden administration has proposed banning another type of bank “junk fee,” targeting fees that are typically charged by banks when a transaction is declined in real time

NEW YORK — The Biden administration proposed banning another type of bank “junk fee” on Wednesday, targeting fees that are typically charged by banks when a transaction is declined in real time.

It's the second major proposal by the Consumer Financial Protection Bureau over fees that Americans sometimes run into when they bank, following the bureau's announcement that it plans to reduce overdraft fees to as little as $3.

The CFPB's proposal focused on a narrower set of transactions: when a customer tries to withdraw money, send a payment immediately, or make a purchase, and that transaction is declined at the time of the transaction due to lack of sufficient funds. The CFPB used the example of a customer trying to buy $100 in groceries with $90 in their bank account, and the transaction is declined at checkout.

When this happens, banks can charge a fee when a customer attempts to withdraw or debit their account more than their available funds. This fee, which the bureau has previously estimated to be around $34, would be entirely banned under the CFPB's new rules.

These types of transactions differ from overdrafts because a transaction in an overdraft scenario is approved and that customer’s account goes negative. They are also different from non-sufficient fees — also known as “bounced check fees” — because those transactions were also preapproved by the customer, like a gym membership or utility bill.

Unlike the overdraft regulations announced last week, the bureau's proposed regulations would apply to all banks and credit unions, even small