The CFPB released a compliance bulletin advising that blanket policies of charging Returned Deposit Item fees to consumers for all transactions no matter the consumers’ circumstances of the transaction or patterns of behavior on the account are likely unfair under the Consumer Financial Protection Act (CFPA).
A Returned Deposited Item is a check that a consumer deposits into their checking account that is returned to the consumer because the check could not be processed against the check originator’s account. When this occurs, the check depositor has no control over and unlikely to anticipate that the deposited check will be returned, and the check depositor cannot verify with the check depositor’s depository institution before depositing the check if there are sufficient funds in the issuer’s account for the check to clear. However, many institutions’ policies typically charge the check depositor a flat amount between $11-19 for every Returned Deposited Items regardless of these circumstances. This fee may be in addition to a non-sufficient funds fee charged by the originating back to the check originator.
The CFPB’s bulletin determined that these policies are likely unfair because the Returned Deposited Item fees cause substantial injury to consumers under the CFPA. The CFPA prohibits covered persons from engaging in unfair acts or practices, which is defined as an unfair act or practice as one that (A) “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable,” and (B) “such substantial injury is not outweighed by countervailing benefits to consumers or to competition.” Consumers are not reasonably able to avoid the substantial monetary injury imposed by these fees because they are not fully informed of the risk and have no practical means to avoid it because the consumer depositing a check would normally be unaware of and have little to no control over whether a check originator has funds in their account, will issue a stop payment instruction, or has closed the account. Nor would a consumer normally be able to verify whether a check will clear with the check originator’s depository institution before depositing the check or be able to pass along the cost of the fee to the check originator. The CFPB states that it is unlikely that an institution will violate the prohibition if the method in which fees are imposed are tailored to only charge consumers who could reasonably avoid the injury, for example, if a fee is only charged if the consumer repeatedly deposits bad checks or only charges fees when checks are unsigned. The CFPB also notes that it would be difficult to show that the injury from these policies is outweighed by countervailing benefits to consumers or competition.
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