Bank Customers Win with $5 Cap on Overdraft Fees
Move could save customers more than $5 billion a year
A new rule from the Consumer Financial Protection Bureau (CFPB) will cap bank overdraft fees at $5 for customers at most banks and credit unions.
The move is expected to save consumers more than $5 billion.
The rule is part of a larger effort by the CFPB to end junk fees - small charges in the financial marketplace that can create headaches for consumers and big profits for banks and other financial players.
CFPB consistently suggests that banks and credit card companies should be competing on service rather than profiting from ridiculous fees.
The consumer win comes amid calls by Elon and The Oligarchs to “delete” the highly effective consumer protector.
Musk wants Big Banks and other actors to freely prey on consumers and boost profits with little fear of recourse.
On the plus side, the overdraft rule is now final - meaning banks will need to comply and consumers will start seeing savings - an estimated $225 per year among households that currently pay overdraft fees.
Consumer advocates praised the move:
“These new protections will put billions of dollars in excessive overdraft fees back into the pockets of millions of consumers and their families,” said Christine Zinner, senior policy counsel at the Americans for Financial Reform Education Fund. “Without these protections, overdraft fees are just another predatory, junk fee that drains people’s savings.”
As Americans for Financial Reform (AFR) explains:
Currently, the very largest banks and credit unions typically charge $35 per overdraft (when banks cover transactions that exceed the available account balance) and do not need to disclose how much these overdrafts cost customers on an annual percentage rate (APR) basis. These overdrafts function as a short-term loan to depositors and the high fees exceed the amount of a typical overdraft transaction of less than $26 (typically repaid within 3 days), resulting in pricing similar to 16,000 percent annual percentage rate (APR). - emphasis added
Some advocates suggest overdraft fees amount to little more than predatory loans:
“Big banks that charge high fees for overdrafts are not providing a courtesy to consumers – it's a form of predatory lending that exacerbates wealth disparities and racial inequalities,” said Carla Sanchez-Adams, senior attorney at the National Consumer Law Center. “The CFPB’s overdraft rule ensures that the most vulnerable consumers are protected from big banks trying to pad their profits with junk fees.”
And CFPB’s own Director Rohit Chopra says:
"For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans' deposit accounts. The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they're charging on overdraft loans."
Rohit Chopra bringing it home for consumers!! I hope he can get more done before he is kicked out for doing his job. I don’t know if they will be able to shut the CFPB down, but they can staff it will people who will ignore the law and allow banks to do whatever they want.