February 26, 2024

The Consumer Financial Protection Bureau has proposed a rule to stop banks from gouging hard-hit families with abusive overdraft fees, which can be as high as $39 and pile on when banks charge multiple fees.

The proposal is part of the CFPB’s ongoing effort to tackle junk fees in the banking and finance industries — and it’s a significant step towards just and equitable banking.

The new rules would apply to banks with more than $10 billion in assets — which covers approximately 175 of the largest banks — and will go a long way towards shutting down what CFPB Director Rohit Chopra called “a massive junk fee harvesting machine.”

If a bank covers a check or debit card purchase when your account doesn’t have enough money, it is granting you a short-term loan. But loopholes in the law have allowed banks to charge high fees without complying with the long-standing consumer protections on loans specified in the Truth in Lending Act (TILA).

The proposed rule would allow financial institutions to charge a fee limited to their costs, generally set between $3 and $14. Banks that want to charge more than their costs would have to offer an overdraft line of credit with a transparent disclosure of the annual percentage rate and other protections including an assessment of the ability to repay. During this comment opportunity, the CFPB is asking for views on the most appropriate benchmark fee amount. 

The CFPB estimates that this rule will save consumers $3.5 billion or more in fees every year.

Comment today to let the CFPB know how important it is to you to stop abusive overdraft fees. Tell the CFPB stories about how overdraft fees have impacted you or your clients, how limits on fees in the proposed rule will help consumers, and what you think the right breakeven fee should be. (Hint: $3!) 

The banking industry is already lobbying to stop this proposal — we can’t let that happen. Spread the word to encourage everyone impacted by overdraft fees to weigh in to support an end to junk overdraft fees!

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