The Consumer Financial Protection Bureau (CFPB) announced Thursday the adoption of a groundbreaking rule imposing a $5 fee cap on overdraft programs at larger banks and credit unions. Expected to save consumers billions annually, the rule seeks to overhaul practices the agency views as exploitative, targeting institutions with assets exceeding $10 billion.
New Rule Addresses “Loophole” and Excessive Fees
The CFPB’s final overdraft rule, initially proposed in January, aims to close a decades-old regulatory gap that allowed overdraft advances to escape loan-like regulation. According to CFPB Director Rohit Chopra, this “loophole” has drained billions from consumer accounts over the years. Under the new rule, banks charging overdraft fees above the $5 cap will face stricter regulations, including disclosure requirements and billing practices similar to those governing credit cards.
“If a bank wants to use overdraft service as a profit center rather than a courtesy, it must meet these heightened requirements,” Chopra explained in a statement. Banks can still exceed the $5 cap if they can prove the fees cover only operational costs and losses.
