Blocking the CFPB’s rule will cost vulnerable families billions in unfair fees
WASHINGTON DC – The House voted today to repeal a new rule adopted by the Consumer Financial Protection Bureau that limits steep overdraft fees charged by large banks and credit unions. The Senate passed a similar repeal resolution last week. Consumers who incur these costly fees stand to lose out on an estimated $5 billion in annual savings if President Trump signs the repeal resolution into law.
“Repealing the CFPB’s limits on overdraft fees gives big banks the green light to rip off their customers with excessive charges that far exceed the cost of covering the transaction,” said Chuck Bell, advocacy program director at Consumer Reports. “Today’s vote means that banks will be able to continue penalizing customers with steep fees even though most overdrafts are for small amounts that are repaid within a few days. At a time when so many families are struggling to keep up with the high cost of living, it is troubling that Congress voted to protect price gouging by big banks at the expense of their most vulnerable customers. We urge President Trump to veto this bill.”
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.” The rule gives big banks and credit unions a variety of options to cover overdrafts, including safer, more transparent overdraft lines of credit with no price limit and they comply with Truth in Lending Act disclosure requirements 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