January 18, 2024
A recent proposal from the Biden administration targeting overdraft fees could help Americans save money.
The Biden administration has proposed a new regulation that could significantly decrease overdraft bank fees for Americans.
The rule, proposed by the Consumer Financial Protection Bureau (CFPB), could reduce overdraft fees by more than half and save families across the country up to $150 annually. According to CBS News, if passed, this resolution would permit banks to either charge consumers the actual cost to cover an overdrawn account or abide by a set limit from the CFPB, therefore removing the automatic $35 overdraft fee as it currently exists.
“Decades ago, overdraft loans got special treatment to make it easier for banks to cover paper checks that were often sent through the mail,” said CFPB Director Rohit Chopra in an official statement. “Today, we are proposing rules to close a longstanding loophole that allowed many large banks to transform overdraft into a massive junk fee harvesting machine.”
President Joe Biden also issued a statement about the decision on Jan. 17: “My Administration took new actions to tackle these hidden fees by proposing a rule that would end excessive overdraft fees. 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. Banks call it a service—I call it exploitation.” This proposal is part of a larger plan to reduce financial strain on American families and, if passed, it would go into effect in October 2025.
The Biden administration has already met with pushback. President and CEO of the American Bankers Association Rob Nichols disapproved of the motion on its website.
“Today’s proposal from the CFPB marks the Bureau’s latest attempt to demonize and mischaracterize highly regulated and clearly disclosed bank fees for a service that surveys consistently show Americans value and appreciate,” he wrote. “In an effort to score political points, the CFPB is seeking to eliminate a valuable service and push consumers who need overdraft protection into the hands of less-regulated, more-costly alternatives,” he said.
RELATED CONTENT: CFPB Speaks Out Against High Overdraft Charges
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