Cap Overdraft Fees: Urge Congress to Support the CFPB’s Junk Fees Proposal

February 26, 2024

The Consumer Financial Protection Bureau has proposed a rule to stop banks from gouging hard-hit families with abusive overdraft fees, which can be as high as $39 and pile on when banks charge multiple fees.

The proposal is part of the CFPB’s ongoing effort to tackle junk fees in the banking and finance industries — and it’s a significant step towards just and equitable banking.

The new rules would apply to banks with more than $10 billion in assets — which covers approximately 175 of the largest banks — and will go a long way towards shutting down what CFPB Director Rohit Chopra called “a massive junk fee harvesting machine.”

If a bank covers a check or debit card purchase when your account doesn’t have enough money, it is granting you a short-term loan. But loopholes in the law have allowed banks to charge high fees without complying with the long-standing consumer protections on loans specified in the Truth in Lending Act (TILA).

The proposed rule would allow financial institutions to charge a fee limited to their costs, generally set between $3 and $14. Banks that want to charge more than their costs would have to offer an overdraft line of credit with a transparent disclosure of the annual percentage rate and other protections including an assessment of the ability to repay. During this comment opportunity, the CFPB is asking for views on the most appropriate benchmark fee amount. 

The CFPB estimates that this rule will save consumers $3.5 billion or more in fees every year.

We urge advocates and consumers to reach out to your senators and representatives to convey your support for the CFPB’s overdraft rule and broader junk fees initiative. Well-written letters from their constituents can have a big influence on legislators’ priorities and decisions. Follow these simple steps to ensure your letter is as effective as possible. 

We are also urging those of you on the ground to submit letters to the editor in your local papers highlighting examples of the devastating problems you are seeing with bank overdraft and other hidden junk fees.

Writing a letter to the editor (LTE) of your local or regional newspaper is a quick and effective way to reach a targeted audience. Here are tips to help you write and place an effective letter.

The banking industry is already lobbying to stop this proposal — we can’t let that happen. Spread the word on social media to encourage everyone impacted by overdraft fees to weigh in to support an end to junk overdraft fees!