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Action Addresses High-Cost Fees That Disproportionately Impact Low-Income New Yorkers

New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris today announced the issuance of new DFS Guidance to New York-regulated banking institutions to promote financial inclusion by prohibiting unfair and deceptive overdraft and non-sufficient funds (NSF) fee practices. Today’s Guidance continues the Department’s commitment to making affordable banking products and services available to underserved communities, including low- and moderate-income individuals, immigrants, and people of color.

“Access to safe, affordable banking services is a critical component of financial health and stability,” said Superintendent of Financial Services Adrienne A. Harris. “This Guidance sets clear expectations for New York banks and credit unions to prevent improper or unfair charges of overdraft and NSF fees, to encourage these institutions to address demand for low-cost banking services and to prevent harm to the most vulnerable consumers of banking services.” 

“Overdraft fees fall most heavily on consumers who are most vulnerable, such as people who are living paycheck to paycheck or have very low balances. New Yorkers work hard for their money and should feel financial security when they deposit their hard-earned income into their bank accounts,” said Senator Sanders. “I applaud the stance of regulatory institutions such as DFS in curbing and combatting these deceptive fees that target vulnerable populations.” 

“For too many New Yorkers, especially those with lower incomes and from disadvantaged communities, overdraft fees and practices are can upend budgets and cause financial turmoil,” said Assemblymember Fahy. “DFS should be recognized for their critical work and the steps they have taken to relieve some of the financial stressors on New Yorkers by holding institutions accountable and making banking more accessible to all New Yorkers.” 

“Consumer Reports commends the New York Department of Financial Services for issuing this important guidance to curb deceptive and hidden overdraft fees,” said Chuck Bell, Programs Director for Consumer Reports. “This important action by DFS will enable consumers to avoid certain types of overdraft fees, and save more of their hard-earned money for other household needs.”

“Overdraft fees fall heavily on families that are struggling to make ends meet and have a particularly harsh impact on communities of color that have long been deprived of the ability to build wealth and financial stability," said Lauren Saunders, Associate Director of the National Consumer Law Center. “Abusive overdraft fee practices exacerbate existing inequalities and take a deep toll on New York’s Black and brown families. I commend the Superintendent for taking action against unfair overdraft fee practices that harm communities already struggling under an historically unfair system.”

“Unfair and deceptive overdraft practices plunder the bank accounts of those who have the least to spare,” said Nadine Chabriersenior policy and litigation counsel for the Center for Responsible Lending. “We commend the New York State Department of Financial Services for issuing guidance that will rein in financial institutions that drain dollars from New York families.” 

Specifically, the Guidance informs all regulated depository institutions of the need to avoid the following practices: 

  • Authorize Positive, Settle Negative (“APSN”) Transactions: charging consumers an overdraft fee even though the consumer had a positive account balance sufficient to cover the transaction when it was authorized by the institution. 

  • Double Fees Arising from Futile Overdraft Protection Transfers: charging a fee to consumers for an “overdraft protection” transfer from a consumer’s other account that is of an insufficient amount to avoid an overdraft, resulting in the consumer being charged both an overdraft fee as well as a fee for the “overdraft protection” transfer.

  • Representment Fees: charging a consumer more than one NSF fee for the same declined transaction, without adequate disclosures, where the merchant re-presents the same transaction to the banking institution in a second or third attempt to collect funds. 

In accordance with the Department’s approach to data-driven policymaking, the Guidance was developed after extensive evaluation and analysis of supervisory examination findings across regulated institutions and engagement with key stakeholders. In addition to the clear and actionable expectations set forth in the Guidance, the Department is continuing to review overdraft and NSF fees more broadly. 

The Department seeks to build an equitable and transparent financial system for all New Yorkers and has taken significant steps to achieve this mission. 

Today’s action follows April’s Guidance encouraging State-regulated banks to offer “Bank On” certified accounts to fulfill the state's affordable banking requirements. Bank On accounts eliminate overdraft fees and are critical to attracting individuals from underserved communities into the banking system. More recently, DFS undertook a data-driven review of check cashing fees and the methodology used to calculate such fees, knowing that many New York consumers, particularly members of immigrant communities and people of color, depend on check cashers as an essential financial service. The proposed regulation is currently open to for public comment. DFS commits to creating more data-driven, practical policies so that New Yorkers continue to have access to affordable and safe products.

A copy of the guidance on DFS expectations for overdraft and NSF fees can be found on the DFS website.

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