NEWS: Yesterday, The League joined 17 other U.S. credit union leagues and associations in filing an “amicus” brief (i.e., a “friend of the court” brief) in support of America’s Credit Unions’ federal litigation against the CFPB’s new overdraft fee rule.
The same day the CFPB released its rule in December, America’s Credit Unions filed a lawsuit in the U.S. District Court of the Southern District of Mississippi to stop it. It was joined by the Consumer Bankers Association, American Bankers Association, and Mississippi Bankers Association, along with several banks. Our amicus brief is designed to help those parties persuade the court to issue an injunction and stop the CFPB’s rule.
The amicus brief raises a variety of arguments, including these:
- It highlights the significance of credit unions’ unique member-owner relationship, which is fundamental to their mission of serving their communities.
- It points out that the CFPB’s rule focuses on calculating costs and assessing fees, but that 1) it fails to account for credit unions’ unique capital and operational realities, and 2) it was developed with data from just five financial institutions, which does not represent the diversity of the U.S. financial services industry.
- It stresses that the CFPB’s rule disregards decades of precedent set by the Federal Reserve Board, which used to have jurisdiction over federal Truth in Lending rules (Reg. Z) before the CFPB. We believe that the CFPB has overstepped its statutory authority by attempting to classify overdraft services as extensions of credit under the Truth in Lending Act and failed to consider the broader economic and operational impacts of the rule.
- It emphasizes that member choice and need remain paramount but that the rule threatens to reduce access to financial services in rural areas and underserved communities, which directly goes against the mission of credit unions.
Collectively, the leagues and other associations that filed the amicus brief represent 3,237 credit unions and 105 million credit union members.
The League will keep Wisconsin’s credit unions informed about developments in this litigation.
Background on the overdraft rule
As we explained in this Dec. 12 Compliance Courier, the CFPB’s rule, which is set to take effect Oct. 1, 2025, applies only to “very large financial institutions,” meaning insured credit unions and other depository institutions with total assets of more than $10 billion. Under the rule, covered credit unions and other financial institutions must choose one of these options when charging for overdrafts:
- Capping their overdraft fee at $5;
- Capping their fee at an amount that covers costs and losses; or
- Disclosing the terms of their overdraft loan just like other loans.
Last April, The League submitted a comment letter on the proposed rule to the CFPB, telling them that Wisconsin’s credit unions opposed these new regulatory requirements.