The Consumer Financial Protection Bureau 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 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.

The consumer bureau has been laying the groundwork for more than a decade for a rule curbing overdraft fees, releasing reports analyzing the fees and discussing its concerns with banking industry executives and trade groups.

Anticipating the crackdown, some large banks have already slashed their fees. In 2022, Citigroup eliminated the fees and Bank of America cut its charge to $10 from $35. Consumers paid $7.7 billion that year in overdraft fees, down from $12.6 billion in 2019, according to the consumer bureau’s estimates.

Banking trade groups are fiercely opposed to stricter overdraft rules. “Overdraft protection fees are clearly disclosed, highly regulated and provide a service that an overwhelming majority of consumers find valuable,” Rob Nichols, the chief executive of the American Bankers Association, said last month.

His group and two others sent Mr. Chopra a letter this month urging the bureau to convene a small-business review panel to comment on the rule, a step the bureau is required to take before it adopts regulations that could substantially affect small companies.

“Regardless of which banks are directly subject to the bureau’s rule, all banks would face market pressure to conform their practices to the bureau’s rule,” the trade groups wrote.

The bureau said this week that it would not convene that requested panel, because its rule would apply only to large banks and credit unions.

Consumer advocates praised the proposal. “Overdraft fees are not so much a useful service as a lucrative profit center that’s largely underwritten by the most economically vulnerable consumers,” said Carter Dougherty, a spokesman for Americans for Financial Reform. “This reform is a step in getting banks back to providing good service and away from gotcha fees.”

The bureau will accept public comments on the proposed rule until April 1, after which it can start the final steps of adopting the changes.

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