CFPB’s Proposed Rule Will Protect Consumers From Excessive, Unfair Banking Fees

January 17, 2024

For Immediate Release:

CFPB’s Proposed Rule Will Protect Consumers From Excessive, Unfair Banking Fees

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau proposed a rule that would ensure that the largest financial institutions can no longer use a “Truth in Lending” regulation loophole to engineer systemic overdraft fees against consumers. Under the proposal, large banks will be allowed to treat overdraft fees as credit in accordance with lending laws and interest rates, or to recover the established costs of overdrafts.

“After many years of the CFPB thoroughly examining modern bank overdraft fee practices, we are pleased that the agency has decided to take definitive steps to shield consumers from the burdensome charges that result,” said Ira Rheingold, executive director of the National Association of Consumer Advocates (NACA).

As the Bureau reports, overdraft used to be a courtesy service for consumers who inadvertently overdrew on their accounts, but recent practices show, that it remains a manipulated, profit-generating machine set up to take more and more from bank customers. That remains true despite some banks’ recent positive actions to stop or limit overdraft charges against their customers.

The overdraft fee proposal follows the Bureau’s 2023 proposed rule on credit card late fees which also seeks to curb unconscionable charges against consumers in another everyday financial product.

“Both proposals to curb credit card late fees and overdraft fees will temper the voracious appetite for profit at the largest financial institutions by setting reasonable limits consistent with existing laws,” said Christine Hines, NACA’s legislative director. “Most importantly, they will help families who are too-often forced to pay these junk fees at the most vulnerable times.