Nullified and Vacated

Over the past few months, we have seen a regulatory pause and rollback. Recently, we have seen two big rollbacks. The Overdraft Lending: Very Large Financial Institutions rule and the Credit Card Penalty Fees rule.

Overdraft Lending Rule

On December 12, 2024, the CFPB issued a final rule limiting overdraft fees for financial institutions with more than $10 billion in assets. The rule amended both Regulation E and Regulation Z with regards to overdraft programs and provided three options for covered credit unions:

• Treat overdrafts as extensions of credit, which would require Regulation Z disclosures with each overdraft.
• Charge a "breakeven" amount that allows the credit union to only recoup the cost of providing the overdraft.
• Charge the safe harbor amount that the CFPB established. The CFPB set the benchmark fee at $5.

The final rule would have been effective on October 1, 2025. America's Credit Unions had also filed a lawsuit to block the rule. However, on April 9, 2025, the House passed a CRA resolution to overturn the Overdraft Lending Rule. The Senate had previously passed its own CRA resolution on the rule. With the passage of these two resolutions and the eventual signature from President Trump, the Overdraft Lending rule will be nullified.

Credit unions may want to note that, with the rollback of this rule, there is no current federal maximum overdraft fee. However, state-chartered credit unions may still want to ensure they do not run afoul of any relevant state laws. Further, all credit unions should still take care regarding overdraft programs as the CRA resolution only nullifies the Overdraft Lending rule. Other guidance and risks, such as class action lawsuits, still remain.

Credit Card Penalty Fees Rule

On March 5, 2024, the CFPB issued a final rule amending Regulation Z and its accompanying commentary to address late fees charged by card issuers that, together with their affiliates, have one million or more open credit card accounts (referred to as "Larger Card Issuers").

The final rule adjusted the safe harbor amounts to a flat fee of $8.00 for all late fees, a decrease from the previous amounts of $30.00 for first violations and $41.00 for subsequent violations within the next six billing cycles. However, on April 15, 2025, an Order & Final Judgment was issued in the United States District Court for the Northern District of Texas Fort Worth Division that vacates the final rule. With the rule vacated, credit unions should note that the previous safe harbor amounts, which were $30.00 for first late payment and $41.00 for subsequent late payment within the next six billing cycles, now applies.

Credit Unions that have less than 1 million open credit card accounts may want to note that the new $32 and $43 safe harbors were brought about by the now vacated rule. This means that credit unions with less than 1 million open credit card accounts may need to adjust their late fees. However, the Electronic Code of Federal Regulations still shows section 1026.52 with the language from the vacated rule. Unfortunately, the Order & Final Judgment does not provide guidance or a discussion regarding compliance requirements for card issuers. If a credit union charges late fees based on the amounts set in the vacated rule, they may want to review whether they should continue to charge those amounts and whether they should revert back to the previous safe harbors.