Official announcements from the CFPB or federal government

CFPB's $5 Overdraft Fee Cap Set for October 2025, Faces Legal Challenges

Dec 13, 2024, 01:55 AM

The Consumer Financial Protection Bureau (CFPB), under the leadership of Director Rohit Chopra, has finalized a rule that will significantly cap bank and credit union overdraft fees at $5, aiming to save American consumers approximately $5 billion annually. This rule, set to take effect on October 1, 2025, applies to financial institutions with more than $10 billion in assets. It provides banks with three options: they can charge a $5 fee, set fees to cover their costs and losses, or charge any fee while complying with lending laws by disclosing the terms of the overdraft loan. The move is part of the Biden administration's broader effort to eliminate 'junk fees' that disproportionately affect vulnerable consumers. Despite opposition from the banking industry, some major banks have already begun to lower or eliminate overdraft fees in anticipation of the rule. The CFPB expects this rule to save the typical household $225 per year, addressing issues like negative credit reporting that have historically impacted consumers' ability to access banking services.