The Biden administration announced a new rule Thursday to limit how much banks can charge customers in overdraft fees, though there's no guarantee it will take effect. The Consumer Financial Protection Bureau said the regulation would save patrons $5 billion per year, per CBS News. There is now no cap on the fees charged them. Under the rule, banks could choose one of these options:
- Charge an overdraft fee of $5. The average fee is now about $35 per transaction, CNBC reports.
- Impose a fee that covers their costs or losses.
- Continue to charge as much as they want, provided they disclose the terms of the overdraft loan and follow lending laws.
The rule applies to banks and credit unions with more than $10 billion in assets. "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 statement. "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." The action is part of President Biden's initiative against junk fees in a series of industries. The rule was announced in February but finalized now, per CNN.
But it's not a given that the rule will take effect in October 2025 as planned. Banking trade groups oppose it, with the American Bankers Association accusing the agency of "demonizing highly regulated and transparent bank fees." President-elect Trump hasn't announced a choice for CFPB director, and ally Elon Musk posted "Delete CFPB" on X last month. Republican opposition to the rule in Congress is possible, per CNN. (More overdraft fee stories.)
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