Overdraft Fees Could Be Capped At $5 Under New Rule

In what could beryllium 1 of nan last salvoes successful President Joe Biden's warfare connected what nan management calls "junk fees," nan Consumer Financial Protection Bureau (CFPB) issued a last norm Thursday capping slope overdraft fees astatine $5 successful astir cases.

The rule, which goes into effect successful October, would restrict what banks tin do erstwhile customers effort to retreat much money than is successful their account. Currently, banks tin either diminution nan transaction aliases fto it spell through, putting nan customer's equilibrium into nan reddish and perchance charging an overdraft fee. Fee amounts alteration by slope but are usually successful nan $30 range, according to bureau research.

"For acold excessively long, nan largest banks person exploited a ineligible loophole that has drained billions of dollars from Americans' deposit accounts," CFPB head Rohit Chopra said successful a property release.

The thought of capping overdraft fees is not excessively celebrated pinch banks. The Consumer Bankers Association (CBA), a waste and acquisition group representing banks, criticized a draft type of nan regulations earlier this year, contending it would wounded consumers.

The CBA based on overdrafts service arsenic an important financial information nett for customers who whitethorn beryllium incapable to entree different forms of credit: by paying an overdraft fee, a customer mightiness beryllium capable to debar missing different bills and incurring heftier fees elsewhere successful their budgets.

The norm applies to banks pinch much than $10 cardinal successful assets. It allows them 3 options erstwhile charging overdraft fees: complaint a interest that covers nan expenses incurred by nan overdraft, complaint a interest of nary much than $5, aliases dainty nan overdraft arsenic a short-term loan, pursuing each nan rules and regulations affecting loans. The CBA said realistically, banks would only ever take nan 2nd option.