Big banks are pushing Congress to block the CFPB’s rule that would save consumers billions
WASHINGTON DC – Consumer Reports urged lawmakers in Congress today to oppose efforts to repeal a rule adopted by the Consumer Financial Protection Bureau to protect consumers from exorbitant overdraft fees charged by large banks and credit unions. House Financial Services Committee Chairman French Hill and Senate Banking Committee Chairmen Tim Scott introduced a Congressional Review Act resolution that aims to block the CFPB’s overdraft fee limits, which would save consumers up to an estimated $5 billion annually.
“For too long, banks have gouged economically vulnerable consumers with costly overdraft fees that make it harder for them to stay on track financially,” said Chuck Bell, advocacy program director at Consumer Reports. “The CFPB’s new rule imposes reasonable limits on overdraft fees so they are in line with a bank’s actual costs instead of a way for banks to pad their profits at the expense of those least able to afford it. Repealing the CFPB’s overdraft fee limits will hurt working families who are already struggling to keep up with high prices and make ends meet.”
The effort to repeal the CFPB’s overdraft limits comes at a time when the CFPB is under attack in Washington. Last weekend, then acting director of the CFPB Russell Vought ordered the Bureau’s staff to cease all supervision and examination activity and all stakeholder engagement, and closed the agency’s headquarters for the week. Vought also alerted the Federal Reserve that the CFPB will not be taking its next installment of funding.
“For more than a decade, the CFPB has stood up for consumers, enacting sensible rules to ensure they are treated fairly and has returned billions of dollars to those who were cheated by banks and other financial firms,” said Chuck Bell, advocacy programs director at Consumer Reports. “Our country learned the hard way how lax oversight of the financial marketplace can have severe consequences for families and the economy. We shouldn’t muzzle the nation’s financial watchdog and leave consumers vulnerable to scams and rip-offs.”
Limits on Overdraft Fees Needed
Large banks typically charge $35 for an overdraft today, even though the majority of consumers’ debit overdrafts are for less than $26 and are repaid in three days, which translates into an annual percentage rate (APR) of over 16,000 percent, according to the CFPB. The burden of overdraft fees falls most heavily on low- and moderate-income customers who make under $65,000 a year. Black consumers are 69 percent more likely and Hispanic consumers are 60 percent more likely than white consumers to live in a household charged at least one overdraft or non-sufficient funds (NSF) fee in the past year.
The CFPB’s rule curbs excessive overdraft fees in a flexible manner by giving banks and credit unions with more than $10 billion in assets the option of charging $5 or a fee that covers “no more than costs or losses.” Large banks and credit unions can still offer overdraft loans at more profitable interest rates as long as they comply with existing Truth in Lending Act disclosure requirements and protections for loans like credit cards. The CFPB estimates that the new rule will save $225 annually per household that pays overdraft fees.
PLEASE NOTE: Consumer Reports has collected stories from consumers who have been charged unfair overdraft fees and can work with reporters to identify consumers willing to be interviewed.
Contact: Michael McCauley, michael.mccauley@consumer.org