Statement: U.S. PIRG applauds CFPB’s final Overdraft Lending Rule

Watchdog agency to curb overly punitive overdraft fees, treat them as consumer credit 

WASHINGTON — The Consumer Financial Protection Bureau (CFPB) finalized its Overdraft Lending Rule on Thursday. If implemented, the final rule would require banks, when levying overdraft fees that exceed the cost to the bank, to provide Truth in Lending Act disclosures and protections required for consumer credit.

In December 2021, the CFPB published research on predatory overdraft fees, showing that the financial sector over-relies on these fees and non-sufficient funds (NSF) revenue, which reached an estimated $15.47 billion combined in 2019. Ironically, one of America’s 15 largest banks, Capital One, announced it would eliminate all overdraft and NSF fees on the same day the CFPB released that report. 

This is the latest in a series of CFPB actions to curb overdraft fees. Over the past two years, the watchdog agency also has ordered Wells Fargo to pay a record $3.7 billion for wrongful actions; issued guidance to ensure banks obtain consumers’ consent before charging overdraft fees; and uncovered numerous illegal junk fees, including surprise overdraft fees, through its supervisory activities. 

Many banks have changed their overdraft practices under the CFPB’s closer watch. Despite those changes and significant reductions in overdraft/NSF revenue, consumers still paid about $5.8 billion in overdraft fees in 2023 and more than $2.3 billion to just 10 large banks in 2023.

In response to the release of the final overdraft rule, PIRG’s Consumer Campaign Director Mike Litt released the following statement:

“Financial institutions rake in billions of dollars a year from overly punitive overdraft fees, which mostly penalize customers with the least money to lose. Many banks commonly charge about $35 per overdraft, sometimes several times in a single day. 

“In practice, overdraft fees have functioned as high-cost credit, so it only makes sense to regulate excessive fees as such. The CFPB’s rule makes overdraft fees more reasonable and in line with the actual costs to banks.

“Consumers stand to save billions of dollars in fees thanks to the laser-focused decision by the CFPB. This rule should be yet another win for consumers by the CFPB, which since Congress set it up after the 2008 economic crash, has returned $19.6 billion to consumers whose money banks and other financial companies took or charged using shady practices.”