The New York State Department of Financial Services has proposed regulations to enhance consumer protections against unfair overdraft fees.
The proposed regulations ensure consumers will no longer be burdened with overdraft fees for minor transactions and require banks to provide timely notifications to consumers about overdraft fees to improve transparency.
“With hidden fees and unfair practices, it has become increasingly more difficult for hard-working New Yorkers to keep up,” New York Gov. Kathy Hochul said. “It is time that we hold banks accountable and lighten the burden of high overdraft fees for minor transactions to keep New Yorkers’ hard-earned money in their pockets.”
Hochul first announced this initiative during her recent 2025 State of the State address.
The proposed regulations eliminate the most exploitative and deceptive banking fees, cap overdraft fees, strengthen customer communications, and establish stricter transaction processing requirements. The rule would prohibit banks from:
- Charging overdraft fees on overdrafts of less than $20.
- Charging overdraft fees that exceed the overdrawn amount.
- Charging more than three overdraft or non-sufficient funds (NSF) fees per consumer account per day.
- Charging NSF fees for instantaneously declined electronic transactions.
- Charging multiple NSF or overdraft fees for the same transaction, including when a merchant resubmits a declined transaction.
- Charging a “sustained,” “continuous,” or “daily” fee for each day an overdraft balance is not repaid.
- Charging double fees to cover an overdraft, such as one fee for automatically transferring funds from another account and a second fee for the overdraft itself.
- Processing electronic debit transactions in a manner intended to maximize the number of overdraft and NSF fees.
- Charging an overdraft fee for an electronic transaction when the consumer’s account indicates sufficient funds at the time the transaction was initiated.
“A healthy market grows when consumers have confidence and trust in the products offered and the providers offering them. Today’s proposed regulation ensures that consumers will no longer be taxed with surprising and disproportionate fees for using the overdraft services provided with their bank accounts,” New York State Department of Financial Services Superintendent Adrienne Harris said.