WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) issued an overdraft rule that will prevent the country’s very largest banks and credit unions from charging excessive overdraft fees, lowering the cost of most overdraft fees from around $30 down to $5.

“This rule provides needed breathing room for financially constrained consumers who are hit hardest by excessive overdraft fees,” said Nadine Chabrier, Senior Policy and Litigation Counsel at the Center for Responsible Lending. “The Consumer Financial Protection Bureau is once again helping Americans keep more of their hard-earned dollars.”

The CFPB estimates the overdraft rule will save an estimated 23 million households an average of $225 per household annually, resulting in total savings of up to $5 billion per year.

Chabrier added, “This rule closes a loophole that exempted overdraft programs from well-established financial laws for far too long. For many financial institutions, overdraft has become a driving profit center used to siphon funds from those customers who can afford it the least, far from its original purpose as an occasional courtesy. Now, very large financial institutions with excessively expensive overdraft programs will play by the same rules that apply to other forms of credit.”

Background

Decades ago, overdraft programs were exempted from credit rules – such as interest rate disclosures – when they operated as courtesy programs to help customers avoid bouncing an occasional check and getting banned by retailers. In subsequent years, they have become unsupervised lending programs that generate extraordinary profits from hardworking families.

The overdraft rule issued today would offer banks and credit unions with over $10 billion in assets three choices: 1) bring their expensive overdraft program into compliance with the rules that other forms of credit follow, 2) charge an overdraft fee that reflects the true cost to the company, or 3) set a fee at or below the “safe harbor” threshold set by this rule at $5.

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Press Contact: matthew.kravitz@responsiblelending.org