Overturning the rule means big banks profit at consumers' expense, the AGs argue
UPDATE:Despite the pleas of consumer advocates the House voted largely along party lines to trash the consumer protection overdraft bill, with Republicans mostly voting to do so and Democrats largely opposing it.
Key Points:
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New York AG Letitia James and 22 other attorneys general are urging the U.S. House to reject a resolution that would reverse the Consumer Financial Protection Bureaus 2024 rule capping overdraft fees.
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The CFPB rule applies only to large banks with over $10 billion in assets, limiting excessive fees that can damage credit and force account closures.
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Critics say overturning the rule would prioritize bank profits over consumers, as overdraft fees often exceed the overdraft amount and disproportionately hurt low-income Americans.
A coalition of 23 attorneys general, led by New York Attorney General Letitia James, has sent a letter to U.S. House leaders urging them to vote against a resolution that would overturn a key Consumer Financial Protection Bureau (CFPB) rule limiting overdraft fees charged by the nations largest banks.
The CFPB rule, finalized in 2024, aims to rein in excessive overdraft fees, which have long been a lucrative but controversial source of revenue for banks. It applies only to banks with more than $10 billion in assets and is designed to protect consumers from predatory charges when they accidentally overdraw their checking accounts.
Overturning this rule will only do one thing: help big banks profit at your expense, said AG James in a statement. Accidentally overdrawing your account by a few dollars shouldnt result in an outrageous fee.
Banks favor scrapping the consumer protection measure, which they say does more harm than good."Its important to remember that government-imposed price controls only harm the consumers theyre purported to help," the Consumer Bankers Associationargues in a statement on its website.
Overdraft fees: A costly burden
The average overdraft fee is around $35, often far exceeding the actual overdrawn amount. In 2023 alone, U.S. banks collected $5.8 billion in overdraft-related revenue. According to the AG coalition, a $35 fee on a $26 overdrafttypically repaid within three daysis equivalent to an annual interest rate of 16,000%.
The attorneys general argue that such fees are not only excessive but also disproportionately harm low-income consumers, frequently leading to credit damage and involuntary account closures that can push people out of the banking system altogether.
The CFPB rule, if preserved, would force banks to treat overdraft fees like interest on a loan, making their true cost more transparent and subject to regulatory scrutiny.
All eyes on the House
The House is expected to vote on House Joint Resolution 59, which would nullify the CFPBs overdraft rule. The Senate narrowly passed its version last month in a 5248 vote, with Republican Senator Josh Hawley(Mo.) joining Democrats in support of the consumer protection.
Supporters of the CFPB rule point out that many major banks including Citigroup, Capital One, and Ally Bank have already eliminated overdraft fees voluntarily, demonstrating that such charges are not essential for maintaining basic banking services.
Joining AG James in signing the letter are attorneys general from California, Illinois, Massachusetts, North Carolina, and other states, as well as the Hawaii Office of Consumer Protection.
With tens of millions of consumers affected by overdraft policies each year, the outcome of this vote could have major implications for bank customers nationwide particularly those living paycheck to paycheck.
Posted: 2025-04-09 20:55:47
