Biden Proposal Would Slash Bank Overdraft Fees to as Low as $3

The Biden administration has targeted the reduction of overdraft fees, proposing a rule that could lower banks’ fees to as little as $3, causing concern among some bankers. The Consumer Financial Protection Bureau (CFPB) introduced the rule, applicable to banks and credit unions with over $10 billion in assets, affecting approximately 175 of the largest financial institutions in the U.S. The proposal requires large to mid-size banks to disclose an annual percentage rate on each overdraft fee, or they can charge a fee based on costs or follow a benchmark set by the bureau.

The CFPB is seeking public input on proposed benchmarks of $3, $6, $7, or $14. Overdraft fees disproportionately impact those living paycheck to paycheck, with many institutions charging $35 for overdrafts that average less than $26, according to an independent watchdog. CFPB Director Rohit Chopra stated the rules aim to close a loophole that allowed large banks to exploit overdrafts as a significant fee source.

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