On Thursday, the Consumer Financial Protection Bureau (CFPB) in the United States announced the final version of a new rule that limits banks from charging overdraft fees to customers. The regulatory agency stated that this regulation could potentially save consumers up to $5 billion annually.
The rule released on Thursday sets the cap for overdraft fees at $5, a significant decrease compared to the typical $35 charged by banks. According to the CFPB, households paying overdraft fees could save about $225 annually.
CFPB Director Rohit Chopra said in a press release, “For too long, the biggest banks have exploited legal loopholes to siphon billions of dollars from Americans’ deposit accounts. The Consumer Financial Protection Bureau is cracking down on these excessive junk fees and demanding that big banks disclose their rates for overdraft loans.”
This new rule by CFPB applies to banks and credit unions with assets of at least $100 billion.
The institution stated that the issued overdraft rule will take effect on October 1, 2025. However, due to the forthcoming Trump administration in January next year, the final fate of this rule remains uncertain.
The proposal for this rule was first announced in January of this year and is part of President Biden’s initiative to combat so-called “junk fees.” The Biden administration aims to increase transparency in charges for aspects like air tickets, live events, car rentals, hotels, banking services, retirement advice, and credit cards.
Banking industry trade groups oppose this new rule, suggesting that its impact could be counterproductive.
Some industry professionals believe that CFPB does not have the legal authority to set this cap on overdraft fees.
Lindsey Johnson, President and CEO of the Consumer Bankers Association, representing financial institutions, stated in a Thursday release that CFPB’s action is a “blatant overreach of its statutory authority.”
The organization also mentioned that they are exploring “all options” to resist this regulation.