CFPB Director Rohit Chopra will testify at a House Financial Services Committee hearing on June 14, 2023.
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The Consumer Financial Protection Bureau on Thursday announced the final version of its rules limiting banks’ ability to charge overdraft fees. The rule is expected to save U.S. consumers $5 billion annually.
Regulators could also choose to allow banks to charge $5 for overdrafts (a significant reduction from the average fee of about $35 per transaction) or limit fees to an amount that covers the lender’s costs. He said they could disclose the interest rate and charge a fee. loan.
“For too long, big banks have exploited loopholes in the law to drain billions of dollars from Americans’ savings accounts,” CFPB Director Rohit Chopra said in a statement. “The CFPB is cracking down on these excessive junk fees and calling on major banks to come clean about the interest rates they charge on overdraft loans.”
Overdraft fees are a lucrative item for the industry, generating $280 billion in revenue since 2000, according to the CFPB, but banks’ revenue from the service is declining. This includes financial institutions. JP Morgan Chase and bank of america Some banks have lowered their fees or limited the types of transactions for which they lower their fees, while some banks have lowered their fees entirely.
The CFPB’s rules apply to banks and credit unions with assets of $10 billion or more.
The effort is part of a flurry of actions by the CFPB during the waning days of the Biden administration, but it faces stiff opposition from U.S. banking groups that have successfully blocked other efforts by the regulator. For example, a rule that capped credit card late fees at $8 per transaction, which was scheduled to go into effect in May, has been blocked in federal court.
The CFPB announced that the overdraft rule will go into effect on October 1, 2025, but the final fate of the rule is unclear.
Even before Donald Trump won the presidential election in November, the fate of overdraft rules would have been uncertain due to industry backlash. But President Trump is expected to install a new CFPB chief in January, who is unlikely to support Biden-era efforts to rein in bank activity.
Bank lobby groups say overdraft rules, first proposed in January as part of Biden’s fight against junk fees, would reduce access to overdraft services and steer customers to worse alternatives such as payday loans. claims that it is possible.
The Consumer Bankers Association said Thursday it is “considering all options” to oppose the rule.
