FOR IMMEDIATE RELEASE: Dec. 12, 2024
CONTACT: Carter Dougherty, carter@ourfinancialsecurity.org
New CFPB Protection Will Curb Big-Bank Overdraft Fees, Save Households Billions Annually
Rule will promote fairer overdraft practices, especially for long-targeted marginalized customers
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) finalized new protections against overdraft fee abuses at the largest financial institutions, closing a decades-old loophole that allowed big banks to gouge their customers for an inexpensive service.
The CFPB’s overdraft fee rule will reduce most overdraft fees from $35 per transaction down to $5, a move that is expected to save households in the United States $5 billion annually.
A fact sheet on the new overdraft rule can be found here.
“These new protections will put billions of dollars in excessive overdraft fees back into the pockets of millions of consumers and their families,” said Christine Zinner, senior policy counsel at the Americans for Financial Reform Education Fund. “Without these protections, overdraft fees are just another predatory, junk fee that drains people’s savings.”
The overdraft rule is only the latest in the CFPB’s successful work protecting consumers from abuses by Wall Street, predatory lenders, and Big Tech. Information on its broader work can be found here.
Currently, the very largest banks and credit unions typically charge $35 per overdraft (when banks cover transactions that exceed the available account balance) and do not need to disclose how much these overdrafts cost customers on an annual percentage rate (APR) basis. These overdrafts function as a short-term loan to depositors and the high fees exceed the amount of a typical overdraft transaction of less than $26 (typically repaid within 3 days), resulting in pricing similar to 16,000 percent annual percentage rate (APR).
The new rule would allow covered financial institutions to offer profitable overdraft loans, but they can choose between the $5 fee (or higher depending on their costs) or can offer overdraft lines of credit that comply with consumer protections and Truth in Lending Act (TILA) disclosure requirements, such as interest rates and fees, just as they would need to for credit card loans and other loans.
“This rule will promote straightforward, more just, and more affordable checking accounts and prevent big banks from charging junk fees that push people out of the banking system.” said Amanda Jackson, consumer campaigns director at AFR-EF. “Today’s rule will support Black and Latine customers, who pay twice as much in banking fees as white customers.”
Many other public-interest advocates support the rule:
“Voters in every state in the nation and across the political spectrum need relief from excessive overdraft fees that kick them while they’re down,” said Carla Sanchez-Adams, senior staff attorney at the National Consumer Law Center. “People should encourage Congress and President-Elect Trump to support this common sense rule, which protects working families over big banks profiting from predatory junk fees.”
“Today, the CFPB reached a major milestone in its effort to level the playing field between regular people and big banks,” said Adam Rust, director of financial services at the Consumer Federation of America. “No one should have to pick between paying a junk overdraft fee or buying groceries. This rule gives banks a choice: they can charge a reasonable fee that does not exploit their customers, or they can treat these loan products as an extension of credit and comply with existing lending laws.”
“Steep overdraft fees have long been a cash cow for banks that have enabled them to rake in billions of dollars in extra profits at the expense of consumers least able to afford it,” said Chuck Bell, advocacy program director at Consumer Reports. “These fees really amount to short-term, high-interest loans that penalize economically vulnerable consumers and make it harder for them to keep their heads above water financially. The CFPB’s rule will go a long way toward protecting consumers by limiting these charges and ensuring they are reasonable and proportional to the actual costs banks face to cover overdrafts.”
“Today, the CFPB reached a major milestone in its effort to level the playing field between regular people and big banks,” said Adam Rust, director of financial services at the Consumer Federation of America. “No one should have to pick between paying a junk overdraft fee or buying groceries. This rule gives banks a choice: they can charge a reasonable fee that does not exploit their customers, or they can treat these loan products as an extension of credit and comply with existing lending laws.”
“The last thing American families need is a surprise $35 fee from their bank,” said Liz Zelnick of Accountable.US. “Those fees add up to the tune of billions per year. Despite efforts to block the rule by big bank CEOs and lobbyists, the Biden administration’s initiative will protect our wallets from an exploitative profit-driving tactic.”
“Simple, common-sense restrictions on overdraft fees should be something everyone can agree on,” said Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition. “The CFPB’s carefully considered work to protect Americans from abusive overdraft fees produced a strong and fair rule. It’s exactly what the CFPB was created to do. All that’s left is to finalize it so the economy can begin to benefit from that hard work.”
“Overdraft fees disproportionately harm people with disabilities, many of whom face significant financial barriers due to systemic inequalities and fixed incomes,” said Marlene Sallo, Executive Director of the National Disability Rights Network. “These punitive fees can trap disabled people in cycles of debt, undermining financial stability and pushing them further from economic inclusion. By addressing predatory overdraft practices, we can take a critical step toward reducing inequities and promoting financial dignity for all.”
“Older adults, especially those living on a fixed income, are negatively impacted by excessive overdraft fees, which take critical resources from those who can least afford it,” said Tracey Thomas Gronniger, Managing Director, Economic Security at Justice in Aging. “The overdraft fee rule is an important step toward protecting older adults and ensuring they are able to keep more of their income for essentials like rent, food, and medications. We applaud the CFPB for taking action on this important issue.”
“By finalizing the overdraft rule, the CFPB has taken a critical step to protect Illinois families from exploitative junk fees,” said Anusha Thotakura, Director at Citizen Action/Illinois. “These fees disproportionately harm low-income families and communities of color, perpetuating financial inequities and deepening economic divides. This rule will save consumers billions and provide much-needed relief. We urge our Senators and Representatives to stand with Illinois families and ensure these protections remain intact.”
“Nearly half—48%—of households with working-age adults with disabilities are unbanked or underbanked, highlighting the systemic financial exclusion this community faces. With poverty rates more than double those of non-disabled adults and significant out-of-pocket costs tied to disability-related needs, people with disabilities on fixed incomes, paid subminimum wages, etc., are especially vulnerable to predatory practices like overdraft fees; this disparity is further magnified for disabled people of color. ‘These fees compound the financial challenges our community already endures, leaving many with limited access to affordable banking options,’ said Dewayne Johnson, Civic Engagement Manager at the American Association of People with Disabilities. ‘It is essential to address these barriers to create a more equitable and inclusive financial system.'”
“We applaud the CFPB for finalizing its Overdraft Fee Rule, a vital step in protecting consumers from predatory junk fees. The CFPB is committed to protecting working families from greedy corporations trying to nickel and dime the consumers every chance they get. Overdraft fees are excessive, harming our country’s most vulnerable. We urge members of Congress to protect this rule,” said Aaron Stephens, Senior Legislative Strategist at P Street.
“We applaud the CFPB for taking action to curb unfair and predatory overdraft fees that disproportionately harm consumers with disabilities,” said Thomas Foley, Executive Director of National Disability Institute. “People with disabilities are much more likely to worry about paying all their bills on time, struggle to save enough for emergency expenses, and rely on subprime financial products to make ends meet. The proposed overdraft rule will help more disabled people, especially those who face additional racial or gender based economic disparities, access and keep mainstream banking services and achieve greater financial stability.”
“Virginians are struggling enough with the cost of housing, utilities, health care, childcare, and many other essential parts of day to day life. We worked to create the CFPB so it could do exactly this–protect our most affected community members from yet another predatory fee,” said Brian Johns, Executive Director of Virginia Organizing.
“Once again, the CFPB does what it was designed to do—stand up for the individual consumer when s/he is taken advantage of by big banks seeking to profit far too much off of junk fees that gouge the customers who can least afford it, said Ruth Susswein, Consumer Action’s Director of Consumer Protection.”
“Consumers stand to save billions of dollars in fees thanks to the laser-focused decision by the CFPB,” said Mike Litt, Consumer Campaign Director at U.S. PIRG. “This rule should be yet another win for consumers by the CFPB, which since Congress set it up after the 2008 economic crash, has returned $19.6 billion to consumers who have been cheated by banks and other financial companies.”
“Thanks again CFPB for standing up for consumers and standing up to financial institutions that gouge working families,” said Kevin Stein, Chief of Legal and Strategy at Rise Economy. “Consumers in California and across the nation are fed up with excessive fees as they strive to stabilize their finances. It’s good to know there is at least one agency that is looking out for them.”
“New Jersey Citizen Action applauds the CFPB’s final rule to lower and limit bank overdraft fees,” said Beverly Brown Ruggia, Financial Justice Program Director for New Jersey Citizen Action. “These fees, which are as high as $35 regardless of the overdraft amount, have become a multibillion dollar business for banks, and are a constant drain on the kitchen table budgets of so many New Jerseyans struggling to make ends meet. We thank the CFPB for continuing to protect Americans from unfair junk fees, and urge our entire New Jersey delegation to do all they can to protect the rule from any challenges that might arise in Congress.”
“Predatory overdraft fees can cause consumers to lose access to their checking and savings accounts, and lose the security of the banking system,” said Christine Hines, Senior Policy Director at National Association of Consumer Advocates. “The CFPB rule is a win for consumers that will ensure fair treatment for customers at big banks across the board, consistent with those financial institutions who have already eliminated or reduced these burdensome charges.”
“This new rule is a win for the many Texans living paycheck to paycheck,” said Ann Baddour, Director of the Fair Financial Services Project at Texas Appleseed. “Overdraft fees are a financially painful gotcha, often for small mistakes. With this new rule, the CFPB has shown, yet again, that it is working on behalf of the American people to ensure fair pricing that benefits family bottom lines.”
“We applaud the CFPB for once again protecting consumers from punishing fees that make it even harder for Georgians to make ends meet,” said Liz Coyle, Executive Director of Georgia Watch. “It’s time to stop big banks from padding their profits with junk overdraft charges.”
“This CFPB rule is incredibly important to Alaskans. Alaskans have a very high cost of living, and a lot of folks don’t have consistent access to a bank branch or even the internet to quickly respond to something going wrong in their bank accounts, like an overdraft fee,” said Claire Lubke, AKPIRG’s Economic Justice Lead. “This rule helps flip the script on banking, returning the benefits to the consumer rather than focusing on massive profits to the banks. Thanks to the CFPB for standing up for Alaskans!”
“We know that exploitative overdraft fees hit families with low incomes hard, and people of color and Mainers in rural areas get hurt most of all,” said Maine People’s Alliance Co-Director Amy Halsted. “That’s not right, and we’re gratified that under this new rule, millions of Americans living paycheck to paycheck won’t be thrown into dire financial straits when they try to buy a $3 cup of coffee and end up owing the bank $38. We urge Sens. Susan Collins and Angus King and Reps. Jared Golden and Chellie Pingree to support these protections, because it’s the right thing to do.”
“A typical debit card overdraft is less than $26 and repaid within 72 hours, but comes with a $35 fee. That translates to an annual percentage rate of over 16,000 percent. There is no justification for that, only greed,” said Sharon McGowan, CEO of Public Justice. “Banks must stop padding their profits with junk fees, which hurt families in every state—red or blue. Lawmakers across the political spectrum should support the CFPB’s overdraft rule, which could save those families $150 each year.”
“We strongly support the CFPB’s finalization of its proposed overdraft fee rule. This critical rule serves to protect vulnerable consumers from the harmful practices of excessive overdraft fees, which disproportionately affect low-income communities and people already facing financial instability, said Daniel Padilla, Executive Director of the Economic Empowerment Center DBA Lending Link. “By creating a fairer and more transparent banking environment, the rule ensures that individuals can access banking services without falling into a cycle of debt. We commend the CFPB for its commitment to financial justice and urge lawmakers to support this important step toward a more equitable financial system for all.”
“These common-sense limits on overdraft fees are exactly why the CFPB is so important,” said Matthew Brooks, Managing Attorney of Greater Boston Legal Services’ Consumer Rights Unit. “The CFPB exists to make sure that the interests of individual Americans are just as protected as the interests of large banks. We applaud the CFPB for adopting this rule that will serve to protect Greater Boston Legal Services’ low-income clients.”
“Excessive overdraft fees, which predominantly penalize lower-income families, are a prime example of why it is so expensive to be poor in our economy. Overdraft provides a useful financial service for many households and should not function as a source to extract additional profit with high fees,” said Jane Doyle, Senior Regulatory Policy Associate at Woodstock Institute. “Woodstock Institute supports the CFPB’s new overdraft rule and the banks and credit unions that are moving to eliminate or reduce these fees.”
“This rule will stop our nation’s largest financial institutions from charging absurdly expensive overdraft fees to financially strained consumers — disproportionately Black, Latino, and low-income consumers,” said Nadine Chabrier, Senior Policy and Litigation Counsel at the Center for Responsible Lending. “This rule is on solid legal footing as it merely ends an unjustified exemption of overdraft programs from well-established financial laws.”
“CFPB is protecting individuals and families from excessive fees that disproportionately impact low-income communities and Black and Latino households”, said Danielle DeLeon Spires, Policy Advocate at Ohio Poverty Law Center. “We thank CFPB for the commitment to creating financial transparency and protecting consumers. We urge our Senators and Representatives to support this rule on behalf of all Ohioans.”
“By finalizing the overdraft rule as part of its ongoing efforts of tackling junk fees, the CFPB is protecting ordinary families from the harmful practices of big Wall Street banks. Our state, which recognizes the destabilizing impact of overdraft fees, is encouraging our senators and representatives to support the rule and put money back in the pocket of New York families,” said Matthew Parham, an attorney with the Western New York Law Center in Buffalo and chair of the steering committee of New Yorkers for Responsible Lending. “Huge back-end overdraft fees are predatory and target consumers of color and low-income families, but everyone can be hurt from abusive overdraft fee practices. People are at the whims of intentional predatory overdraft actions by big banks.”
“We applaud the CPFB for standing up once again to protect consumers by finalizing its common-sense rule to cap banking overdraft fees,” said Jagjit Nagra, Executive Director at Oregon Consumer Justice. “This change will put an end to excessive overdraft charges and restore money to Oregon households. It also takes an important step toward making banking more transparent and fair, especially for Black, Latino, and low-income families who are among the hardest hit by these junk fees.”
“We commend the CFPB for taking a bold stand against overdraft fees, which often result in account closures and negative reports to credit agencies, making it harder for consumers to open future accounts. These fees disproportionately harm young people, people of color, and those living paycheck to paycheck,” said Robert Herrell, Executive Director of the Consumer Federation of California. “This new CFPB rule will protect consumers from being exploited by these harmful practices, which are designed solely to extract wealth from hardworking families. By finalizing this rule, the CFPB ensures that states like California can secure transparency and financial protection for hundreds of thousands of consumers.”
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