Washington, D.C. — Following the Consumer Financial Protection Bureau’s finalization of a rule to close an outdated overdraft loophole that exempted overdraft loans from lending laws, the American Economic Liberties Project released the following statement.

“We’re thrilled to see the CFPB finalize this clear and enforceable rule that will save consumers billions by eliminating useless junk fees and allow honest businesses to better compete,” said Morgan Harper, Director of Policy and Advocacy at the American Economic Liberties Project. “For years, the biggest financial institutions have exploited the overdraft loophole to tack on sky high and unnecessary charges that prey on the consumers that can least afford them. The CFPB’s commonsense solution forces Big Banks to either cap their fee at $5, disclose the terms of the overdraft loan like all other loans, or prove the price of the fee actually corresponds to their related costs. It’s a great step for more transparency and fairness in the financial system and a big win for consumers, which is why it’s crucial the next administration vigorously enforces this important rule.”

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.

According to the CFPB, the final rule updates regulation of overdraft fees for the biggest financial institutions — with more than $10 billion in assets — forcing them to either cap their overdraft fee at $5, cap their fee at an amount that covers costs and losses, or disclose the terms of their overdraft loans like other loans.

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.

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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.