Biden administration unveils proposed changes to big banks' overdraft fees
The Consumer Financial Protection Bureau on Wednesday unveiled long-awaited changes to how the nation’s biggest banks structure overdraft protection plans.
The Consumer Financial Protection Bureau on Wednesday unveiled long-awaited changes to how the nation’s biggest banks structure overdraft protection plans.
The independent watchdog agency said the new rule closes a loophole that for decades has exempted overdraft loans from the consumer protections required by the 1968 Truth in Lending Act.
Since 2000, American consumers have paid an estimated $280 billion in bank overdraft fees, according to CFPB data. During that time, the annual revenue big banks derived from overdraft fees soared, helped along by the boom in consumer debit cards tied directly to checking accounts.
“For too long, some banks have charged exorbitant overdraft fees—sometimes $30 or more—that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines,” President Joe Biden said in a statement Wednesday on the new rules. “Banks call it a service—I call it exploitation.”
The new regulations would apply only to banks with more than $10 billion in assets, a total of around 175 institutions nationwide, the CFPB said. Taken together, these banks typically account for the lion’s share of the overdraft fees charged in any given year.
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