Washington, D.C. —The Consumer Federation of America released the following statement in response to the introduction of a joint resolution disapproving the rule submitted by the Consumer Financial Protection relating to overdraft lending. The resolution would use the Congressional Review Act to overturn the CFPB’s Overdraft Lending: Very Large Financial Institutions final rule.

“A $35 overdraft junk fee threatens to exhaust scarce funds needed by struggling households to pay for groceries and gas. These fees, often coming as a surprise, push too many hard-working Americans out of the banking system,” said Adam Rust, director of financial services for the Consumer Federation of America. “Reversing the overdraft rule will make it harder for many people to make ends meet. A vote against the overdraft rule is a decision to prioritize Wall Street’s profits above the needs of people living paycheck to paycheck. CFA calls on Congress to reject this bill. Instead of making life better for big banks, our elected officials should pursue an agenda serving the needs of everyday Americans.”

About Overdraft fees and the CFPB’s Rule

• By lowering overdraft fees to five dollars, the rule will save households approximately $5 billion per year.
• The rule applies to banks and credit unions with more than $10 billion in assets. The rule does not change the regulatory treatment of smaller financial institutions.
• In 2023, consumers paid $5.8 billion in overdraft fees. In recent years, some banks eliminated or reduced overdraft fees. Consumers paid more than $12 billion as recently as in 2020.
• The rule doesn’t ban overdraft fees. It still permits them to offer overdraft credit and gives them a range of options to comply with the rule. They can offer a traditional overdraft at $5 (the “benchmark” fee), charge their direct costs (the “breakeven standard”),  or issue an overdraft line of credit subject to the Truth in Lending Act (Regulation Z) and the Electronic Funds Transfer Act (Regulation E). The rule does not reduce access to credit. It encourages banks to offer small-dollar short-term credit that is affordable, safely underwritten, and transparent.
• Eight banks collected $3.3 billion in overdraft fees in 2023. Just two banks – JPMorgan Chase and Wells Fargo – collected $2.04 billion (61.8 percent) of those funds.
• According to the Federal Reserve, almost 40 percent of US adults have less than $400 in liquid assets. For those households, a $35 overdraft fee will cost 8.8 percent of their available resources.
• The majority of overdrafts charged as a result of debit card purchases occur for transactions of less than $26, yet the prevailing cost of an overdraft exceeds $27 and is often greater than $35. As well, since the majority are repaid in 3 or fewer days, the prevailing rate of interest on an overdraft is 16,000 percent.
• The CFPB has repeatedly identified policies at banks designed to increase overdraft revenues. These examples include cases where employees were paid bonuses for encouraging consumers to opt-in for overdraft services, claims that overdraft was “free” or “comes with” the account, and for illegal surprise overdraft fees charged on transactions that were authorized with positive balances but later settled negative.
• Citigroup and Capital One have ceased to charge overdraft fees, underscoring how banks can operate without relying on penalty fees. Bank of America has capped overdraft fees at ten dollars and no longer permits overdrafts on PIN debit and ATM transactions.