Blocking the rule will cost vulnerable families billions in unfair fees
WASHINGTON DC – The House Financial Services Committee voted today to repeal limits adopted by the Consumer Financial Protection Bureau on steep overdraft fees charged by large banks and credit unions. If adopted by the House and Senate, the Congressional Review Act resolution approved by the Committee would eliminate an estimated $5 billion in annual savings for vulnerable families who incur these excessive fees.
“Repealing the CFPB’s overdraft fee limits will hurt working families who are already struggling with high prices and making ends meet,” said Chuck Bell, advocacy program director at Consumer Reports. ”For too long, banks have gouged economically vulnerable consumers with costly overdraft fees that make it harder for them to stay on track financially. 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.”
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.
Media Contact: Michael McCauley, michael.mccauley@consumer.org