The Consumer Financial Protection Bureau (CFPB) on Wednesday proposed a rule that would sharply limit overdraft charges at America’s largest banks and credit unions, a change that the agency estimated could save households up to $3.5 billion a year in fees, the New York Times reported. The proposal, which must go through a comment period and would not take effect until at least late 2025, aims to end the $35 overdraft fee that has become the standard at many banks. The bureau’s rule would give banks a few options for setting a lower fee. They could charge a break-even fee — based on the individual bank’s own costs — or a benchmark fee determined by the bureau. The agency has proposed a range of $3 to $14 for the benchmark. Alternatively, the banks could treat overdrafts as a line of credit and provide the disclosures required by the Truth in Lending Act, including interest rates. “Decades ago, overdraft loans got special treatment to make it easier for banks to cover paper checks that were often sent through the mail,” said Rohit Chopra, the consumer bureau’s director. “Today, we are proposing rules to close a longstanding loophole that allowed many large banks to transform overdraft into a massive junk fee harvesting machine.” The proposed rule would apply only to institutions with assets of $10 billion or more, a category that includes roughly 175 of the nation’s more than 9,000 banks and credit unions. Those large providers collect about two-thirds of all overdraft fee revenue, the bureau said.
