News Release: New CFPB Protections on Overdrafts Will Save Consumers Billions

by team in Statements and Press Releases

FOR IMMEDIATE RELEASE

Jan. 17, 2024

CONTACT
Carter Dougherty
carter@ourfinancialsecurity.org

New CFPB Protections on Overdrafts Will Save Consumers Billions

WASHINGTON, D.C. – The Consumer Financial Protection Bureau’s new protections for big bank customers against abusive overdraft charges is a critical initiative in reforming a practice that has drained billions of dollars in junk fees from consumers.

“Curbing abusive overdraft fees will help stop Wall Street from padding its bottom line with the hard-earned money of millions of families in the United States,” said Kimberly Fountain, consumer field manager at Americans for Financial Reform. “Overdraft fees are not so much a useful service as they are a lucrative profit center underwritten by the most economically vulnerable consumers.”

There is a strong case for overdraft reform:

  • Overdraft fees take a lot of money out of people’s pockets; it’s about $9 billion per year. Megabanks are big beneficiaries.
  • The most vulnerable consumers are the ones that pay. A consumer is three times more likely to pay overdrafts if they make less than $65k than if they make more than $175k
  • By contrast, banks are incredibly profitable. On Friday, JPMorgan reported the largest profit by an American bank in history – $49 billion last year – thanks in part to billions in overdraft revenue.
  • People are surprised by overdrafts. They are not, as the bank lobby likes to claim, a financial management tool that people use consciously.
  • Overdraft reform guards against price gouging and promotes competition. By curbing these fees, the price of having a bank account becomes more transparent.

This new consumer protection is a part of the Biden administration’s ongoing fight against junk fees, which Americans strongly support. The CFPB reform has the potential to stop abusive overdrafts without banning them entirely.

“This new policy would give banks the flexibility to have overdraft services but imposes vital guardrails to protect consumers,” Fountain added. “It’s a common-sense reform that will give consumers much-needed relief.”

###