Published: December 2024

New CFPB overdraft fee rule will save consumers billions annually

Coalition: Americans for Financial Reform

Members of the Americans for Financial Reform coalition applauded the CFPB for finalizing a new rule that will protect consumers against overdraft fee abuses at the largest financial institutions.

Americans for Financial Reform, a coalition of consumer advocates of which Consumer Action is a member, issued a statement applauding the Consumer Financial Protection Bureau (CFPB) for finalizing a new rule that will protect consumers from overdraft fee abuses at the largest financial institutions. The rule will reduce most overdraft fees (charged when customers spend more money than they have in their bank accounts) from $35 per transaction to $5, a move that is expected to save households in the United States $5 billion annually. Large banks will have the option to cap their overdraft fees at $5 or another amount that covers their costs and losses, or to treat overdrafts as a line of credit and provide transparent pricing and similar disclosures required of credit cards and other loans under the Truth in Lending Act (TILA). Mid-sized and smaller institutions are exempt from the rule. Most overdrafts are for less than $26 and are repaid within three days, resulting in the equivalent of a 16,000% annual percentage rate (APR)—often for transactions consumers would rather have had denied. Banks have also charged overdraft fees when the account had sufficient funds, manipulated the order of transactions, and engaged in other abuses. The rule will eliminate the incentive for these exploitative practices while allowing banks to offer overdraft credit profitably in a fairer and more transparent manner.

Lead Organization

Americans for Financial Reform

More Information

Read the press release here.

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