A resolution seeking to overturn the Consumer Financial Protection Bureau’s (CFPB) rule imposing a limit on bank account overdraft fees passed in the House Financial Services Committee (FSC) by a 30-19 vote. The rule calls for banks with $10 billion or more in total assets to cap overdraft fees at $5.
Covered institutions are also allowed to voluntarily set a cap that covers their actual costs and losses or treat overdraft protection as a loan covered by the Truth in Lending Act under the rule.
FSC Chair French Hill (R-Ark.) introduced the H.J. Res. 59 in the House while Senate Banking Committee Chair Tim Scott (R-S.C.) sponsored the resolution in the Senate. In accordance with the Congressional Review Act (CRA), the H.J. Res. 59 would nullify the controversial overdraft rule if approved by the Senate and signed by the president.
American Bankers Association President and CEO Rob Nichols applauded the resolution to nullify what he called a “misguided” attempt to regulate overdraft products.
“The bureau’s rule was flawed and unlawful from the start, and went against the wishes of a strong majority of Americans who have repeatedly indicated that they value and appreciate overdraft protection,” Nichols said. “By demonizing these highly regulated and transparent bank fees and attempting to implement government price controls, the rule would make it significantly harder for banks to provide this valuable service.”
Furthermore, he referred to overdraft products as “much-needed” solutions valued by consumers, especially those with few other options for covering essential expenses.
Consumer Bankers Association President and CEO Lindsey Johnson framed Hill’s effort to overturn the overdraft rule as a means of “protecting consumers’ access to overdraft services — particularly those who lack access to credit and use overdraft to pay for necessities like food and utilities.”
“This effort to invalidate the CFPB’s overdraft rule underscores the serious concerns lawmakers have about how this rule will negatively impact Americans and the long-term damage that government-imposed price controls have on this highly-competitive financial services market,” Johnson said.
Despite these contentions by the banking lobby, consumer advocacy groups have continually asserted that capping overdraft fees is critical to helping consumers struggling with debt, echoing the CFPB’s past arguments that overdraft fees should be treated as a form of credit.
“Congress always hears from corporate lobbyists and billionaires pushing to dismantle the CFPB and undo its rules to reduce overdraft fees from $35 to $5, eliminate medical debt from credit reports, and protect consumers from fraud in big tech payment apps,” National Consumer Law Center Associate Director Lauren Saunders said in a statement. “It’s time lawmakers hear from the ordinary consumers, the families living paycheck-to-paycheck who expected them to work to reduce the cost of living, not line big banks’ pockets and increase the cost of credit.”
When Hill introduced the CRA resolution in early February, Consumer Federation of America (CFA) Financial Services Director Adam Rust argued “[r]eversing the overdraft rule will make it harder for many people to make ends meet” and “[a] vote against the overdraft rule is a decision to prioritize Wall Street’s profits above the needs of people living paycheck to paycheck.”
“A $35 overdraft junk fee threatens to exhaust scarce funds needed by struggling households to pay for groceries and gas,” Rust asserted. “These fees, often coming as a surprise, push too many hard-working Americans out of the banking system.”
The CFA recently announced that hundreds of consumer advocates and concerned voters from 45 states and the District of Columbia plan to meet with members of Congress to insist they support a strong and independent CFPB the week of March 10.