On September 24, the Governor of California signed AB 2017 (the "Act") into law. The Act prohibits state-chartered banks and credit unions from charging consumers non-sufficient fund fees ("NSF fees") when they initiate transactions that are instantaneously declined due to insufficient funds.
The Act's analysis indicates that the law garnered support in both the California state Senate and the Assembly. The analysis explains that NSF fees are most likely to be assessed on financially vulnerable consumers, increasing financial strain while also "negatively affecting a consumer's overall perceptions of the banking system being fair and transparent." Moreover, the analysis provides that the Act seeks to provide protections similar to those proposed by the CFPB. However, while the analysis makes it clear that the Act does away with NSF fees to protect consumers from "abusive practices," the Act itself does not label NSF fees as "abusive."
The Act will go into effect on January 25, 2025.
Putting it into Practice: "Junk fees" as they are termed by federal regulators, have come under tremendous scrutiny in recent years (as discussed here, here, and here). However, much of the recent action has been at the federal level. Look for states, especially state financial regulators, to follow in the federal government's footsteps to enact their own laws regarding fees. In some cases, the state laws may be more restrictive on financial institutions than what the CFPB is proposing.
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