Should Congress repeal the CFPB’s new rule limiting overdraft fees for large banks?
S.J. Res. 18 is a congressional resolution nullifying a rule issued by the Bureau of Consumer Financial Protection (CFPB) on overdraft lending for very large financial institutions. The CFPB’s rule sought to regulate overdraft fees or impose stricter requirements on how major banks handle overdraft lending. By passing this resolution, Congress would prevent the rule from taking effect, allowing large banks to continue their existing overdraft practices without additional federal restrictions. This decision could impact consumers by maintaining the current system, where banks may charge overdraft fees without further oversight.
Sponsor: Senator Tim Scott (Republican, South Carolina)
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Opponents say
• "Today, the Consumer Financial Protection Bureau (CFPB) took action to close an outdated overdraft loophole that exempted overdraft loans from lending laws. The agency’s final rule on overdraft fees applies to the banks and credit unions with more than $10 billion in assets that dominate the U.S. market. The reforms will allow large banks several options to manage their overdraft lending program: they can choose to charge $5; 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 final rule is expected to add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees. Today’s action closes the large bank regulatory loophole that exempted overdraft fees as a finance charge. When Congress passed the Truth in Lending Act (TILA) in 1968, many families used mail to send and receive checks, and were subject to various bank processing times in order for their deposits and withdrawals to clear. In 1969, the Federal Reserve Board exempted banks from TILA protections for infrequent cases where a bank was honoring a check that had not cleared and subjected the customer to overdraft fees. At the time, overdraft services were not considered profit drivers but courtesy services extended by the bank when, for instance, a paper check sent through the mail may have arrived late. Over the past few decades, these highly profitable overdraft loans have increased consumer costs by billions of dollars. The loans have also led to tens of millions of consumers losing access to banking services, as well as facing negative credit reporting that has prevented them from opening another account in the future." Source: Consumer Financial Protection Bureau
• "Congress just voted to increase bank fees, overturning a CFPB rule that would have saved hardworking American families billons a year — this directly harms consumers already struggling with affordability and the ripples of inflation. Let me be clear: by allowing big banks to charge high overdraft fees, Congress is paving the way for wealthy banks to get wealthier, and for working class people to be squeezed even further." Source: California Attorney General Rob Bonta
Proponents say
• "The Biden Administration’s CFPB routinely targeted legitimate payment incentives and practices in pursuit of political headlines over sound policies. The overdraft rule was yet another example – many consumers rely on overdraft services to make ends meet and limiting this practice will push Americans to riskier financial products. I’m proud to lead the effort to overturn this misguided rule and protect Americans’ access to important financial services." Source: Senator Tim Scott (Republican, South Carolina), the sponsor of this bill
• "We commend House Financial Services Committee Chair French Hill and Senate Banking Committee Chair Tim Scott for introducing this critical resolution to overturn the Biden-Chopra CFPB’s misguided rule imposing government price controls on overdraft services. This rule is a blatant overreach—one the Bureau never had the authority to impose in the first place. Millions of hardworking Americans, including the one in five without access to credit, rely on overdraft services as a valuable financial lifeline, yet the Biden-Chopra CFPB’s overdraft rule threatens to cut off their access to this essential bank product. We thank Rep. Hill and Sen. Scott for their leadership in standing up for consumers and preserving access to financial products that provide consumers flexibility and security when they need it most." Source: Consumer Bankers Association (CBA) President and CEO Lindsey Johnson
