CFPB Rule Limits Overdraft Fees to $5

The Consumer Financial Protection Bureau (CFPB) recently announced a new rule set to go into effect in October 2025 to regulate overdraft programs. Under the new regulations, large financial institutions must choose one of three options for overdrafts: a $5 maximum overdraft fee, set fees to cover costs and losses, or comply with standard lending laws like interest rate disclosures.

“For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans’ deposit accounts,” said CFPB Director Rohit Chopra in a press release. “The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they’re charging on overdraft loans.”

Last year, consumers paid more than $5.8 billion in reported overdraft and non-sufficient fund fees, even though many banks had already reduced or eliminated overdraft fees. The CFPB’s release stated that the changes within the rule could save consumers up to $5 billion annually, or roughly $225 per household that incurs overdraft fees.

The regulation is part of a broader government-wide approach to address junk fees. Most overdraft loans are not covered under the Truth in Lending Act (TILA)/Regulation Z, but the bureau’s ruling would close that loophole. 

Though the CFPB’s rule would save consumers’ money by slashing overdraft fees, PYMNTS noted that financial institutions would consider offsetting the impact of the regulation by cutting back on products and services. 

Banks could even cut back on overdrafts themselves, which have often served as a lifeline for consumers trying to make essential purchases. 20 percent of consumers have withdrawn money from an account through the last year without having the funds to cover the transaction. For consumers living paycheck to paycheck, that percentage rises to 39 percent.