CFPB Director Rohit Chopra testifies during a House Financial Services Committee hearing on June 14, 2023.
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The Consumer Financial Protection Bureau announced the final on Thursday version of one rule limiting the ability of banks to charge overdrafts. According to the report, the rule will save American consumers $5 billion annually.
The regulator said banks can choose to charge $5 for overdrafts – a sharp drop from the average fee of about $35 per transaction – or limit the fee to an amount that covers lenders’ costs covers, or charge a fee while the interest rate is made public. the loan.
“For too long, the largest banks have exploited a legal loophole that has drained billions of dollars from America’s deposit accounts,” CFPB Director Rohit Chopra said in a speech. statement. “The CFPB is cracking down on these excessive junk fees and is requiring major banks to disclose the interest they charge on overdrafts.”
Although overdrafts have been a lucrative part of the industry, generating $280 billion in revenue since 2000, according to the CFPB, banks’ revenues from the service have declined. That’s because lenders include JPMorgan Chase And Bank of America have reduced fees or limited the types of transactions that trigger them, while some banks have reduced fees altogether.
The CFPB rule applies to banks and credit unions with at least $10 billion in assets.
The effort, part of a flurry of activity by the CFPB in the waning days of the Biden administration, faces stiff opposition from U.S. banking groups that have successfully stymied other efforts by the regulator. For example, a rule that was supposed to go into effect in May for late credit card payments at $8 per incident has been stayed in federal court.
The CFPB said the overdraft rule will go into effect on October 1, 2025, although the rule’s ultimate fate is unclear.
Even before Donald Trump’s victory in the November presidential election, the fate of the overdraft rule would have been murky, thanks to industry pushback. But Trump is expected to install a new CFPB head in January, who is unlikely to support Biden-era efforts to rein in banking activity.
Bank lobby groups have argued that the overdraft rule, first proposed in January as part of Biden’s war on junk fees, would reduce access to overdrafts and could steer customers toward worse alternatives such as payday loans.
The Consumer Bankers Association said Thursday it is “exploring all options” to oppose the rule.