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The Consumer Financial Protection Bureau (CFPB) has proposed a rule that would stop banks from collecting insufficient funds fees on transactions that are declined in real time.
This rule covers transactions such as declined debit card purchases, ATM withdrawals, and some declined peer-to-peer payments.
The plan is part of the CFPB’s recently announced fight against so-called “junk fees” for basic customer services.
Explaining why, the bureau says that when someone doesn’t have enough money in their account to cover a transaction, one of two things generally happens. The financial institution extends credit in the form of an overdraft to cover the difference and authorizes the transaction to take place. through; or they may simply decline the transaction due to insufficient funds.
Generally, financial institutions only charge fees for processed and rejected non-funded transactions, i.e. electronic authorizations such as checks and ACH transactions.
According to the CFPB, financial institutions are unlikely to charge fees for transactions that are declined in real-time with a swipe, tap, or click.
“Specifically, as technology advances, financial institutions may be able to decline more transactions with just a swipe, tap, or click. , online money transfers, in-person bank tellers, and certain person-to-person transactions,” the statement said.
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