President Donald Trump signed into law resolution to overturn a rule from the Consumer Financial Protection Bureau’s (CFPB) that would cap overdraft fees at $5.
The resolution was first offered by Sen. Tim Scott (R-SC) and approved in the House and Senate before being signed into law by the president.
“The Biden administration’s ill-conceived rule imposing new price controls on overdraft services provided by banks and credit unions harmed the very consumers the CFPB is supposed to protect. The rule would have reduced access to credit and important financial services and resulted in more unbanked Americans. That’s why I led the effort in Congress to overturn the rule, and I’m grateful for President Trump’s support to eliminate this misguided rule once and for all,” Scott said.
The overturned rule capped bank overdraft fees at $5. It also allowed banks to offer overdraft as a courtesy by charging a fee that covers no more than costs or losses; or continue to extend profit-generating overdraft loans if they comply with longstanding lending laws, including disclosing any applicable interest rate. The rule was expected to add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees.
The Independent Community Bankers of America (ICBA) applauded the move.
“ICBA and the nation’s community banks commend President Trump and Congress for enacting this critical resolution to overturn the CFPB’s final rule on overdraft services and preclude the agency from issuing a substantially similar rule in the future,” ICBA President and CEO Rebeca Romero Rainey said. “The CFPB overdraft rule would have had harmful unintended consequences on the consumers and local communities that community banks serve by causing them to experience the harsh realities of rejected payments. Further, the CFPB’s rule exceeded the bureau’s statutory authority under the Truth in Lending Act and violated existing regulations that have determined overdrafts are not extensions of credit.”