WASHINGTON, D.C.— Brady Williams, Legal Counsel, issued the following statement on the Consumer Financial Protection Bureau’s (CFPB’s) finalization of its long-awaited overdraft fees rule:
“Today, the CFPB championed the cause of consumers by finalizing its long-awaited overdraft fees rule, which will close an outdated loophole that exempted overdraft loans from traditional lending laws. This loophole allowed banks to charge abusive and exploitative overdraft costs, draining billions of dollars a year from millions of financially vulnerable Americans.
“The CFPB’s rule will prevent large banks from charging exorbitant junk overdraft fees that burden families with hundreds of dollars a year in unexpected costs and sometimes even push them out of the traditional banking system altogether. The new rule will promote straightforward, affordable forms of overdraft coverage protection by allowing banks to choose from three separate options to manage their overdraft lending program:
“First, they may simply charge a maximum of $5, which the Bureau has reduced from the previous maximum of $35. Alternatively, they may charge a fee that covers no more than what the overdraft costs the bank to complete. Or, lastly, they may continue to extend profit-generating overdraft loans, so long as they comply with longstanding lending laws, including disclosing any applicable interest rate. In other words, the days of levying overdraft fees as a source of profit-generation while dodging traditional lending and disclosure requirements are over.
“The rule is estimated to save consumers $5 billion in annual overdraft fees nationwide, or $225 for each household that pays overdraft fees. For everyday consumers struggling to make ends meet, that $225 will go a long way toward ensuring their financial security. Instead of lining banking executives’ pockets, these funds will stay where they belong: in the accounts of those who actually earned it.”
In April 2024, Better Markets submitted a joint-comment letter to the CFPB in support of the proposed rule, which you can read here.
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Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
