CFPB’s Payment App and Overdraft Rules Face Challenges in Congress

Two rules announced by the Consumer Financial Protection Bureau (CFPB) during the Biden administration suffered setbacks in Congress on Wednesday (March 5).

The Senate voted Wednesday to approve a joint resolution (S.J. Res. 28) disapproving of the “Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications” rule submitted by the CFPB.

The resolution was passed on a 51 to 47 vote, according to the Senate website.

The resolution still requires House approval, The Verge reported Wednesday.

If approved, it would ensure that the rule would have no force or effect, according to the text of the joint resolution.

When the CFPB announced the final rule on Nov. 21, the regulator said in a press release that it would help the CFPB ensure that the largest nonbank companies — those handling more than 50 million transactions per year — follow federal law like large banks, credit unions and other financial institutions already do.

For example, the release said, the rule would enable the CFPB to supervise these companies in terms of privacy and surveillance, errors and fraud, and debanking.

Opponents of this rule contended that by treating nonbank providers like banks, it would wind up “chilling innovation in the market.”

In another setback for the CFPB, the House Financial Services Committee approved a resolution Wednesday disapproving of the “Overdraft Lending: Very Large Financial Institutions” rule submitted by the CFPB. The resolution was passed by the committee by a vote of 30 to 19, the account of the committee’s Republicans said in a post on X.

After approval by the committee, the resolution (H.J. Res. 59) heads to the House floor. A matching resolution in the Senate (S.J. Res. 18) is awaiting a vote, Bloomberg Law reported Wednesday.

When announcing this final rule on Dec. 12, the CFPB said in a press release that it would update the federal regulation governing overdraft fees for financial institutions with more than $10 billion in assets, requiring them to cap their overdraft fee at $5, cap their fee at an amount that covers costs and losses, or “disclose the terms of their overdraft loan just like other loans.”

When opponents of the rule introduced Congressional Review Act (CRA) resolutions in the House and Senate in February, they said this rule capping overdraft fees would harm consumers by denying them choices and pushing them toward riskier financial products.