Attorneys General Ask Federal Regulators to Keep Overdraft Rule
Twenty-five state attorneys general (AGs) sent a letter to Kathy Kraninger, director of the Consumer Financial Protection Bureau (CFPB), urging the CFPB to not weaken or rescind the overdraft rule.
“We are aware of no evidence or other basis to believe that the Overdraft Rule places any economic burdens or costs on smaller financial institutions, or indeed on financial institutions generally,” said the letter. “Any marginal reduction in earnings resulting from the imposition of fewer overdraft fees is not a basis for modifying a rule.”
The CFPB announced in May that it would seek public comment on whether it should amend or rescind the overdraft rule to minimize “any significant economic impact.” The overdraft rule prohibits financial institutions from charging an overdraft fee to consumers without receiving their consent.
The New York AG office issued a press release accompanying the letter that referenced a CFPB study that found that only 16 percent of consumers affirmatively opt in to overdraft protection, which has “benefited millions of Americans.”
“If the CFPB rolls back this rule, it would put hard-working people in harm’s way by allowing banks to charge more overdraft fees, all in the name of corporate greed,” said New York AG Letitia James. “Consumers across New York deserve the chance to make informed decisions about their finances, so I urge the CFPB to give them that opportunity and create a more efficient and fair marketplace.”
The Center for Responsible Lending claims that banks with assets more than $1 billion earned more than $11.5 billion in overdraft fees in 2017, leading some Democratic Congressmen to ask for stronger protections against overdraft fees.
Just last year, U.S. Senators Cory Booker (D-N.J.) and Sherrod Brown (D-Ohio) introduced legislation targeting what they saw as “exploitative overdraft fees that banks charge consumers when they make a purchase or pay a bill but don’t have sufficient funds in their account.” The bill, dubbed the “Stop Overdraft Profiteering Act of 2018,” would ban overdraft fees on debit card transactions and ATM withdrawals, and limit fees placed for checks and recurring payments. The bill was reintroduced in this Congress on May 22.