ICYMI: Biden-Harris Administration Proposes Rule to Curtail Overdraft Fees

Yesterday, the Biden-Harris Administration took its latest action to crack down on hidden junk fees, proposing a rule that would end excessive overdraft fees. The proposal would cut the average overdraft fee by more than half, saving the typical American family that pays these fees $150 a year. That would add up to save families $3.5 billion every year. While some Republicans in Congress continue to defend these exploitative fees while fighting to secure more giveaways for the wealthy and big corporations, the Biden-Harris Administration will continue working every single day to bring down costs for hardworking Americans.

Read more below:

CNN: Biden administration proposes rule that could save consumers $3.5 billion a year in bank fees
[Jeanne Sahadi, 1/17/24]

The Consumer Financial Protection Bureau on Wednesday said it is proposing a rule that would curb excessive overdraft fees charged to customers of large banks and credit unions, potentially saving consumers as much as $3.5 billion a year.

The rule would only apply to banks and credit unions with at least $10 billion in assets, which account for the largest share of deposit account customers in the United States.

Too often, the consumer watchdog agency has noted, bank customers are surprised by overdraft fees and those who can least afford them are charged the most frequently.

CNN: "Biden Admin Proposes New Rule to Slash Bank Overdraft Fees"
KATE BOULDAN: It is a move the Biden Administration says could save consumers as much as $3.5 billion a year. The target is overdraft fees at some of the nation's biggest banks. CNN's Matt Egan has more details for us on this. So what is the Administration proposing?

MATT EGAN: They're basically proposing taking a sledgehammer to overdraft fees. And I don't think you're going to hear many Americans complain because they're kind of the worst. First, you run out of money in your bank account. Then, you get slapped with a fee. It's like you're getting kicked when you're already down. And we're not talking about pennies: The average overdraft fee is $35. That adds up. Since 2000, regulators say Americans have been charged $280 billion on overdraft fees alone. $280 billion. Now, under these new rules being proposed by regulators, the cost of an overdraft could go down to as little as $3. Officials say that this could save the average household $150 a year. That's nothing to sneeze at—especially because they say that overdraft fees actually hurt the most vulnerable, the people who can afford it the least. President Biden put out a statement saying, "For too long, some banks have charged exorbitant overdraft fees…that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines. Banks call it a service—I call it exploitation." Now, this administration has clearly targeted what they call junk fees—concerts, credit cards, cable bills, and now overdraft fees.

Axios: Biden admin proposes new rule to cut bank overdraft fees to as low as $3
[Jacob Knutson, 1/17/24]

The Biden administration on Wednesday proposed reining in big banks' overdraft fees, in a move that could lower them to as little as $3.

Why it matters: If enacted, the introduced rule from the Consumer Finance Protection Bureau (CFPB) could eliminate billions of dollars of annual revenue that banks rake in from fees charged to consumers who overdraft their accounts.

1. The fees disproportionately affect households already struggling financially, the CFPB said in a release.
2. The proposal is a part of the Biden administration's effort to clamp down on "junk fees" in a wide range of industries.

New York Times: Consumer Bureau Proposes Overdraft Fee Limits for Large Banks
[Stacy Cowley, 1/17/24]

The Consumer Financial Protection Bureau on Wednesday proposed a rule that would sharply limit overdraft charges at the largest banks and credit unions in the United States, a change that the agency estimated could save households up to $3.5 billion a year in fees.

The proposal, which must go through a comment period and would not take effect until at least late 2025, aims to end the $35 overdraft fee that has become the standard at many banks.

USA Today: Overdraft fees charged by banks would drop to as low as $3 under new Biden proposal
[Joey Garrison, 1/17/24]

The Biden administration on Wednesday proposed a new consumer-protection rule aimed at cutting expensive overdraft fees that banks charge by more than half as part of President Joe Biden's efforts to curb so-called "junk fees."

The Consumer Financial Protection Bureau rule would close a regulatory loophole that exempts overdraft lending services from provisions in the federal Truth in Lending Act of 1968. As a result of the loophole, banks rake in billions in revenue by charging fees, typically about $35, when a debit-card transaction forces the balance of an account into negative.

Under the new rule, banks could still offer overdraft loans to consumers ? but the banks would have to be compliant with federal consumer protections for lending. That includes disclosing interest rates and fees for overdraft transactions, identical to the requirements for credit cards and other loans.

Reuters: Biden admin unveils proposed curbs on overdraft fees
[Douglas Gillison, 1/17/24]

The Biden administration on Wednesday unveiled new draft regulations officials said could save consumers $3.5 billion a year by curbing the fees large banks charge on overdrawn deposit accounts.

The announcement marked the latest effort in U.S. President Joe Biden's crackdown on the so-called junk fees consumers face across various industries such as housing, tourism, medicine and finance.

Associated Press: Banks prepare to take on the Biden administration over billions of dollars in overdraft fees
[Ken Sweet and Cora Lewis, 1/17/24]

The squabble over billion of dollars in overdraft fees that Americans get charged every year is intensifying.

The Consumer Financial Protection Bureau is expected to propose rules this week that further rein in banks' ability to charge customers a fee when they overdraw their bank account. Opponents of the fees often cite the example of a $3 cup of coffee costing someone $40.

The banking industry is gearing up to fight back with a multimillion-dollar marketing and lobbying campaign. While banks have drastically cut back on overdraft fees in the past decade, the nation's biggest banks still take in roughly $8 billion in overdraft fees every year, according to data from the CFPB and bank public records.

Business Insider: The Biden administration wants to save Americans $3.5 billion a year by making sure banks aren't profiting too much off of overdraft fees
[Juliana Kaplan and Ayelet Sheffey, 1/17/24]

Trying to buy something without enough money in your checking account can lead to a hefty surprise overdraft fee. If the Biden administration gets its way, those fees, which produce major profits for banks, could soon shrink substantially.

On Wednesday, the Consumer Financial Protection Bureau released its proposal for a new rule that would protect Americans from the consequences of overdraft fees by ensuring big banks — with over $10 billion in assets — are complying with consumer law. That limit covers about 175 of the largest banks in the country, per the CFPB.

CBS News: Overdraft fees would drop to as little as $3 under Biden proposal
[Kate Gibson, 1/17/24]

The Biden administration is proposing a new rule that could limit bank overdraft fees to as little as $3.

The proposed regulation unveiled by the Consumer Financial Protection Bureau in tandem with the White House could potentially cut billions in dollars that large banks earn from bank customers overdrawing their accounts.

"For too long, some banks have charged exorbitant overdraft fees—sometimes $30 or more—that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines," President Joe Biden said Wednesday in a statement. "Banks call it a service — I call it exploitation."

CNBC: Biden administration unveils proposed changes to big banks' overdraft fees
[Chelsey Cox, 1/17/23]

The Consumer Financial Protection Bureau on Wednesday unveiled long-awaited changes to how the nation's biggest banks structure overdraft protection plans.

The independent watchdog agency said the new rule closes a loophole that for decades has exempted overdraft loans from the consumer protections required by the 1968 Truth in Lending Act.

Since 2000, American consumers have paid an estimated $280 billion in bank overdraft fees, according to CFPB data. During that time, the annual revenue big banks derived from overdraft fees soared, helped along by the boom in consumer debit cards tied directly to checking accounts.

The Wall Street Journal: Overdraft Fees Generate Billions for Big Banks. The Biden Administration Wants to Change That.
[Andrew Ackerman, 1/17/24]

The Biden administration wants to curb how much big banks reap from checking-account overdraft fees, which generate billions of dollars in revenue a year from customers who are often cash-strapped.

The Consumer Financial Protection Bureau plans to issue a proposal Wednesday that would subject overdraft services to the same protections as other types of consumer loans, unless banks charge much lower fees—perhaps as low as $3.

Overdraft services are currently exempt from the traditional disclosures on potential costs required with credit cards and other loans.

The CFPB says that overdraft fees are typically $35, even though the majority of overdrafts are for less than $26 and repaid in three days.

"Banks call it a service—I call it exploitation," President Biden said in a written statement.

Fox Business: Biden unveils new proposal to slash bank overdraft fees
[Megan Henney, 1/17/24]

The Biden administration unveiled a new proposal on Wednesday aimed at cutting overdraft fees that banks charge, to as little as $3.
[…]
"For too long, some banks have charged exorbitant overdraft fees – sometimes $30 or more – that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines," President Biden said in a statement. "Banks call it a service – I call it exploitation."

Money: Inside the Biden Administration's Plan to Stop 'Out-of-Control' Overdraft Fees
[Adam Hardy, 1/17/24]

Pesky overdraft fees from banks and credit unions could soon get a major overhaul, collectively saving Americans an estimated $3.5 billion a year.

The Consumer Financial Protection Bureau, or CFPB, announced Wednesday that it intends to curb overdraft fees from big banks by proposing fee limits and treating overdrafts more like loans, which are subject to stricter oversight.
[…]
The CFPB calls these charges "junk fees" and says they are getting "out of control." The agency started cracking down on overdrafts in 2021, spurring major banks like Capital One and Bank of America to eliminate or reduce them. In 2022, the CFPB put out a public call for feedback on junk fees and received more than 80,000 responses — the "overwhelming majority" of which were complaints about overdraft and NSF fees, the agency says.

Barron's: Biden Administration Unveils Proposal to Lower 'Exorbitant Overdraft Fees' at Big Banks
[Emily Dattilo, 1/17/24]

The Biden administration Wednesday proposed a rule that would dial back overdraft fees charged by the country's biggest banks.

"For too long, some banks have charged exorbitant overdraft fees- sometimes $30 or more- that often hit the most vulnerable Americans the hardest, all while banks pad their bottoms lines," President Joe Biden said in a statement. "Banks call it a service- I call it exploitation."

The proposal—from the Consumer Financial Protection Bureau—would shutter a legal loophole that has exempted overdraft lending services from consumer financial protection laws including the Truth in Lending Act, the agency said in a statement, and it would apply to insured financial institutions with more than $10 billion in assets.