The Consumer Financial Protection Bureau (CFPB) finalized a rule on Thursday that could save banking customers up to $5 billion per year by capping overdraft fees at $5 for many accounts, significantly reducing the typical $35 fee charged by banks.
Rohit Chopra, the CFPB director, told ABC News that the rule could save the average household $225 annually. “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,” Chopra said.
Overdraft fees are charged when customers withdraw more money than is available in their checking accounts. The new rule, set to take effect on October 1, 2025, is part of the Biden administration’s broader effort to eliminate so-called junk fees, which disproportionately impact low-income households.
The banking industry has criticized the regulation, and legal challenges could delay its implementation. Additionally, Republican leaders in Congress have expressed opposition to the rule, framing it as government overreach.
Senate Minority Leader Mitch McConnell and other GOP lawmakers have frequently condemned the Biden administration’s regulatory approach, describing it as excessive and harmful to businesses.
The CFPB’s move aligns with other initiatives by the administration to address hidden costs in various industries, including ticketing, airlines, and housing. Advocates say these measures are critical for consumer protection, while opponents argue they could increase costs elsewhere or limit consumer choice.
As the rule faces potential legal and political hurdles, its eventual impact will depend on whether it can survive challenges from industry groups and potential changes in administration priorities.
