JACKSON, Miss.–Financial trade groups wasted little time in challenging the CFPB’s final overdraft rule, filing a lawsuit here in United States District Court for the Southern District of Mississippi, Northern Division.
The Consumer Bankers Association and co-plaintiffs—America's Credit Unions, the American Bankers Association, Consumer Bankers Association and the Mississippi Bankers Association—are seeking a preliminary injunction barring the CFPB from implementing the new rule until the court makes a final decision on the merits of the case.
As CUToday.info reported, financial trade groups Thursday were quick to speak out against the final rule.
The groups, in a release, stated the CFPB has exceeded its regulatory authority by issuing the final OD rule.
“More importantly, the CFPB fails to appropriately consider how its actions will harm the consumers who most benefit from the access to the liquidity enabled by overdraft services,” the groups stated.
“The CFPB issuing its final rule on overdraft nearly a month before the Trump Administration is set to begin is risky behavior for a regulator and for the consumers they claim to protect,” said ACU President/CEO Jim Nussle in the release. “Not only does it exceed the Bureau's authority, but it threatens to eliminate financial protections for consumers. Everyone should have access to services that allow them to make ends meet without having to choose between buying groceries or paying a utility bill.
“These financial hardships have serious consequences on families, and overdraft programs provide an affordable lifeline in these circumstances,” continued Nussle. “America’s Credit Unions' mission is to ensure consumers can partner with credit unions for their financial health and to achieve their best lives. The association is going to continue to fight through legal action to reverse this grave mistake from Director Chopra.”
ABA’s Nichols Comments
ABA President Rob Nichols stated, “It’s unfortunate that we have to turn to the courts once again to rein in a CFPB director unwilling to recognize the clear legal boundaries set by Congress. The CFPB’s final overdraft rule exceeds the Bureau’s statutory authority, ignores thoughtful industry and stakeholder feedback, and will harm the very consumers the CFPB claims to protect. Surveys consistently show that Americans understand and appreciate overdraft protection, and if this rule is allowed to move forward, many Americans will lose this service. Consumers don’t want that to happen, which is why we have joined this litigation. We look forward to the court’s review.”
CBA’s Perspective
CBA President and CEO Lindsey Johnson shared a similar perspective, stating, "The CFPB’s rule on overdraft services harms Americans who need it most – including the 26 million Americans who don't have access to credit and thus stand to lose the most if overdraft services are restricted. Overdraft services are an essential lifeline for consumers when they experience unexpected expenses. Research shows that overdraft services provide much-needed liquidity during a short-term budget shortfall so consumers can put food on the table, keep the lights on, and make other important payments on time. Without overdraft services, consumers on the margins are more likely to turn toward worse, less-regulated non-banking services to fill the gap.
"While it is unfortunate, CBA had no choice but to pursue legal action to counter the CFPB's blatant statutory overreach with its misguided rule to ensure consumers continue to have access to liquidity through overdraft services,” added Johnson.