Fee Practices: UDAAP Violations

The CFPB has issued new guidance for “junk fee” practices by banks that are likely to violate the prohibition against unfair, deceptive, and abusive acts or practices (“UDAAP”) in Section 1036 of the Consumer Financial Protection Act (“CFPA”). The CFPB’s Consumer Financial Protection Circular 2022-06, published on October 26, discusses how unanticipated overdraft fee assessment practices may violate the CFPA. According to the circular, overdraft fees assessed by banks on transactions that a consumer would not reasonably anticipate likely constitute UDAAP violations of the CFPA. The circular includes examples of situations that may cause unexpected overdraft fees that violate the CFPA, such as “authorize positive, settle negative” transactions.