Washington, D.C. — In response to a new, proposed rule from the Consumer Financial Protection Bureau to limit overdraft fees that banks charge consumers, the American Economic Liberties Project released the following statement.

“Not only are overdraft fees unnecessary and exploitative, but they disproportionately affect low-income Americans who can least afford them,” said Shahid Naeem, Senior Policy Analyst at the American Economic Liberties Project. “While some banks have already responded to CFPB pressure and reduced or eliminated these fees, Americans shouldn’t have to rely on the discretion of individual banks. The CFPB is proposing clear, enforceable rules that will reduce overdraft fees and save Americans billions, closing another lucrative regulatory loophole banks use to prey on consumers.”

What was once a courtesy service allowing Americans to avoid the consequences of bounced checks and transactions made against depleted account balances has become a lucrative revenue source for banks, who rake in billions yearly — $9 billion in 2022 alone — and charge an average of $26 for each instance, with some fees as high as $35.

The proposed rule would subject overdraft fees issued by large financial institutions (above $10 billion in assets) to the Truth in Lending Act, extending to overdrafts the same disclosures and protections required for other forms of issued credit — regulations that banks have so far avoided. Alternatively, banks could choose to set fees as low as $3, or charge an amount that they can prove is limited to strictly recouping their costs. Together, the CFPB projects the rule will save consumers about $3.5 billion yearly.

The CFPB has made protecting consumers from these fees a priority, ordering banks to return hundreds of millions in illegal overdraft and NSF fees while successfully pressuring much of the financial industry to curb their overdraft fee addiction. As a result, the CFPB is already saving Americans more than $5.5 billion annually.

Like other financial services junk fees, overdraft/NSF fees are a burden disproportionately borne by those in the most precarious financial circumstances: Research shows that just 9% of Americans pay 80% of overdraft/NSF fees, and that those in households earning $65,000 are charged these fees at a rate three and a half times more than households earning $175,000.

Find a list of the CFPB’s accomplishments under Director Chopra’s leadership here.

Learn more about Economic Liberties here.

###

The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.