New overdraft rule finalized by Consumer Financial Protection Bureau

A new federal rule plans to cap bank overdraft fees at five dollars for many customers. That five-dollar cap could add up to a five-billion-dollar savings per year on those banking fees, according to the Consumer Financial Protection Bureau.

The new rule finalized by the Consumer Financial Protection Bureau aims to save money for bank customers.

Bank overdraft fees kick in when you try to withdraw more money from your checking account than you actually have available.

Those fees are usually $35 per transaction, but that may soon change to a cap of five dollars for many customers.

Chopra:
"Big banks love overdraft. It is easy profit for them. But it is punishing for so many Americans, especially those who live paycheck to paycheck."

Rohit Chopra, the director of the Consumer Financial Protection Bureau, a government watchdog in charge of protecting the public’s finances, says the average American family incurring overdraft fees will save around $225 per year or more.

Chopra:
"The reason why overdraft fees add up to so much is we’ve seen how banks can reorder your payments or where a debit card purchase for something small like a coffee can end up with a big fee."

The cap was first proposed last January as part of the Biden administration’s crackdown on so-called junk fees.

The banking industry is accusing the CFPB of "blatant overreach."

The Consumer Banking Association, in a statement, said: "The proposed rule would reduce consumer choice and ignore the substantial progress America’s leading banks have made in saving money for consumers."

They say that this is undermining some of the progress that banks have already made and would jeopardize access to some of those overdraft services.

Some major banks have already acted on this, such as Ally, Citi, Bank of America, and Capital One, voluntarily eliminating or reducing overdraft fees.

Under the new federal law, banks could still charge more than five dollars, but those terms would have to be agreed upon upfront. The change officially takes effect next October, but it could face legal challenges.

Author: Central Oregon Daily News
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News post in at: December 14, 2024, 3:01 am.

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