CFPB Caps Overdraft Fees at $5 for Large Banks, Saving Consumers $5 Billion Annually

Dec 12, 2024, 04:24 PM

The Biden administration has finalized a rule that significantly limits the amount banks can charge for overdraft fees, aiming to curb what it terms 'junk fees' that disproportionately affect consumers with lower account balances. The rule, announced by the Consumer Financial Protection Bureau (CFPB) under Director Rohit Chopra, offers banks three options for managing overdraft fees: a flat fee of $5 per transaction, a fee that covers only the costs and losses associated with the service, or any fee with full disclosure of terms akin to other loans, including the interest rate. This regulation applies to banks and credit unions with assets exceeding $10 billion, covering the majority of the U.S. market. The CFPB estimates that this rule will save American consumers approximately $5 billion annually, or about $225 per household that typically incurs these fees. The move has faced opposition from the banking industry, with potential legal challenges and Congressional action looming, especially given the incoming Trump administration's stance on regulatory reform. The CFPB has been actively addressing junk fees across various sectors, and this rule is part of that broader initiative. Additionally, California has enacted Senate Bill 1075 and Assembly Bill 2017 to provide further consumer protections against overdraft and non-sufficient funds fees.