A group of financial associations, including the Bank Policy Institute, applauded Congressional leaders for recent resolutions calling for the Consumer Financial Protection Bureau’s (CFPB) overdraft rule to be invalidated.
The overdraft rule would require very large financial institutions to treat overdraft loans like credit cards and other loans as well as to provide clear disclosures and other protections.
The associations — including BPI, Consumer Bankers Association, Independent Community Bankers of America, America’s Credit Unions, and the American Bankers Association – say the rule would negatively impact millions of consumers.
“If not invalidated, former Director Chopra’s final rule will effectively bring an end to overdraft services for consumers who have few, if any, other options for meeting short-term liquidity needs, all to advance the prior administration’s political campaign against ‘junk fees,’” the groups wrote in letters to U.S. Sen. Tim Scott (R-SC) and U.S. Rep. French Hill (R-SC).
Scott, chair of the Senate Banking Committee, and Hill, chair of the House Financial Services Committee, sponsored the resolutions in their respective bodies to invalidate the rule.
“Before the CFPB released its overdraft proposal, many financial institutions had proactively made changes to their overdraft programs to reflect competitive developments within the industry. These innovations include sending low balance alerts, imposing a de minimis threshold triggering an overdraft fee, capping total fees that the bank may charge per day, and providing overdraft “grace periods” during which a customer can make a deposit and avoid a fee,” the groups wrote.
Further, they noted that there has been a $5 billion reduction of overdraft fees from 2019 to 2022 because of these financial innovations, a nearly 50 percent drop since before the pandemic. Further, more recently announced changes to overdraft programs are projected to save consumers $18.3 billion from 2021 through 2025.
“The rule goes well beyond the agency’s statutory authority, reversing 55 years of consistent interpretation of the Truth in Lending Act and Regulation Z by the agencies charged with enforcing the statute and by the courts that have ruled on its scope. We urge Congress to pass the disapproval resolution without delay,” the groups added.