CFPB’s Plan to Crack Down on Overdraft Fees Expected in December

Dec 6, 2023Federal Regulation, News

Officials from the Consumer Financial Protection Bureau (CFPB) have recently told industry executives that the agency will most likely reveal its plan to crack down on overdraft fees this month. The Bureau has been crafting overdraft regulations for months, but thus far most of the details have remained a secret.

The Biden administration has been targeting overdraft charges as part of a broader effort to take on what it describes as “junk fees.” Though the CFPB declined to comment on the time frame of all of its regulation plans, it noted that banks gained nearly $8.5 billion in 2021 from insufficient funds and other low-balance fees, according to Bloomberg.

“The CFPB is likely to roll out an overdraft fee proposal very soon, and anything the CFPB does around fees is BAD, REALLY REALLY BAD. NO GOOD, ROTTEN, TERRIBLE BAD,” said Greg Mesack, senior vice president of government affairs at the National Association of Federally-Insured Credit Unions, in an email to Bloomberg Law.

Last year, Wells Fargo & Co. reached a $3.7 billion settlement with federal regulators to settle allegations that it illegally charged “surprise” overdraft fees. Regions Financial Corp. also agreed to pay $191 million to settle a similar case last year, and the CFPB called the bank a “repeat offender.”

Other large banks like Capital One Financial Corp. and Citigroup Inc. have stopped charging overdraft fees that could be up to $35 per charge. However, some industry advocates are preparing for a fight with the CFPB, as many smaller banks and credit unions rely on overdraft fees for revenue. 

Though the CFPB’s plans are still a secret, many have considered that the regulations might include asset thresholds to permit some small banks and credit unions to avoid the effects. 

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