--- title: Inside the Biden Administration's Plan to Stop 'Out-of-Control' Overdraft Fees description: The CFPB intends to curb overdraft fees from big banks by treating overdrafts more like loans, which are subject to stricter oversight. authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 499 covers: - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Julia Glum role: Managing Editor url: https://money.com/author/julia-glum/ bio: Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. She also writes Dollar Scholar, a weekly newsletter that teaches young adults how to navigate the messy world of money. education: University of Florida at_money_since: 2018 articles: 453 covers: - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - Newsweek - International Business Times - CBS News - Good Morning America - WUSA9 - Pix 11 - The New York Times - Mashable - The Washington Post - CNBC - Politico social: - https://x.com/superjulia - https://www.linkedin.com/in/julia-glum published: '2024-01-17T16:48:50.000Z' modified: '2024-01-17T16:48:50.000Z' section: Banking tags: - News word_count: 897 canonical: https://money.com/overdraft-fees-banks-cfpb/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Hand reaching out of a pile of bills](https://img.money.com/2024/01/News-CFPB-Overdraft-Fees.jpg) Pesky overdraft fees from [banks and credit unions](https://money.com/best-banks/) could soon get a major overhaul, collectively saving Americans an estimated $3.5 billion a year. The Consumer Financial Protection Bureau, or CFPB, announced Wednesday that it intends to curb overdraft fees from big banks by proposing fee limits and treating overdrafts more like loans, which are subject to stricter oversight. "We really want people to be able to compare apples to apples," CFPB Director [Rohit Chopra](https://money.com/changemakers/rohit-chopra/) tells Money. "Right now, when you take out a loan, you get clear disclosures. There's some core consumer protections. The overdraft loophole allows banks to sidestep that." The loophole in question is one that exempts overdrafts from provisions of the Truth in Lending Act, which protects people from unfair lending practices and requires financial institutions to disclose annual percentage rates on their [loan products](https://money.com/loans/). In recent years, the CFPB argues, this has allowed large banks to rely on overdraft fees as a core part of their business model. Overdraft services went from an occasional courtesy to what Chopra calls a "massive profit machine." ## Get more from your Checking Account with cashback rewards from Discover® ### A cashback-enabled checking account not only provides the convenience of managing your finances seamlessly but also rewards you with cash incentives for everyday transactions, putting money back in your pocket. Click on your state to learn more. [See Details](https://money.com/pr/y52cd0cece7f?ap_referrer=%2Foverdraft-fees-banks-cfpb%2F) Banks charge overdraft fees when you make a transaction that would bring your balance below zero. The bank allows your transaction to go through but makes your account balance negative, adding a penalty in the process. The CFPB sees the lucrative practice as a loan and now wants to regulate them as such. "You always have to worry when a financial company is rooting for their own customers to slip up or go bust," Chopra says. If finalized, the rule would apply to financial institutions with more than $10 billion in assets. These institutions would have two options: Either charge a “break-even” fee — likely between $3 and $14 — or treat overdrafts as a line of credit. Choosing the latter would mean complying with all the legal protections that entails, such as making ability-to-repay determinations, clearly disclosing rights and interest rates and offering alternative repayment options. Advocates have been fighting for an end to overdraft fees and similar non-sufficient fund (NSF) fees entirely. While the CFPB's rule was largely applauded by consumer advocacy groups on Wednesday, some expected more from the rule. In the case of NSF fees, which are not included in the CFPB's proposal, banks charge a fee of a similar amount *and* decline the transaction. Chopra acknowledged the exclusion in an interview with Money, saying that the new rule is a framework to treat overdrafts as loans. Since the transaction is declined in the case of NSF fees, there is no real extension of credit by the bank. But he notes that these, too, can be exploitative, adding "to stay tuned for more on NSF fees." ## Enjoy the convenience of banking while earning 1% cash-back on your regular purchases ### Experience the dual advantage of effortless money management and financial perks with a checking account offering cashback from Discover®. Click below to learn more. [See Details](https://money.com/pr/n6bf5e6e0627?ap_referrer=%2Foverdraft-fees-banks-cfpb%2F) ## 'Penalizing you for being poor' Carla Sanchez-Adams, a senior attorney at the nonprofit National Consumer Law Center (NCLC), says that overdraft fees typically run about $35 dollars and have no relationship to the actual cost of the bank covering the overdraft. In most cases, the fees are triggered for overdrafts of less than $26 and are repaid quickly, usually within three days, according to the CFPB. That's the equivalent of a whopping 16,000% APR — way above the legal limit. The CFPB calls these charges “junk fees” and says they are getting “out of control.” The agency started cracking down on overdrafts in 2021, spurring [major](https://money.com/citi-eliminating-overdraft-fees/) [banks like Capital One](https://money.com/capital-one-drops-overdraft-fees/) and [Bank of America](https://money.com/bank-of-america-overdraft-fees-change/) to eliminate or reduce them. In 2022, the CFPB put out a public call for feedback on junk fees and received more than 80,000 responses — the "overwhelming majority" of which were complaints about overdraft and NSF fees, the agency says. Despite recent industry reforms, banks are still pulling in between $9 and $10 billion per year from people who overdraw their accounts. “It’s just profit,” Sanchez-Adams says. “They’re penalizing you for being poor.” Financial institutions don't always see it that way. The American Bankers Association, a major banking trade group, railed against the proposal, saying that the CFPB is essentially taking overdraft protections away from people who want and need them. "Today’s proposal from the CFPB marks the Bureau’s latest attempt to demonize and mischaracterize highly regulated and clearly disclosed bank fees," Rob Nicols, president and CEO of the ABA, said in a statement. "Surveys consistently show Americans value and appreciate" overdrafts services, he added. The rule is far from a done deal; the earliest it could be approved is October. First, the CFPB must hold a public comment period before finalizing the rule, which must then clear Congress, and the agency is clearly primed for a fight. The NCLC, which has long called for overdraft reforms, says [overdraft fees plague low-income Americans](https://money.com/overdraft-nsf-fees-low-income-americans/) and people of color in particular. A recent CFPB report backs that up, finding that more than 1 in 4 households got hit with an overdraft fee within the past year — and many low-income households were hit with numerous fees, sometimes 10 or more in a year. “Some consumers appear to use overdrafts often and intentionally as a source of credit, even with their high cost,” the [report states](https://files.consumerfinance.gov/f/documents/cfpb_overdraft-nsf-report_2023-12.pdf). Soon, federal law could catch up to those consumers who have long treated overdrafts that way. ![](https://s3.consumersadvocate.org/prd/image/image/19978/medium_09303199-0eb1-4bc1-81f4-bba87bf39bd2.png) Open a SoFi® Checking and Savings account today [See Details](https://money.com/pr/e2eb41300f54?ap_referrer=%2Foverdraft-fees-banks-cfpb%2F) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/overdraft-fees-banks-cfpb/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Banking", "item": "https://money.com/banking/" }, { "@type": "ListItem", "position": 3, "name": "Inside the Biden Administration's Plan to Stop 'Out-of-Control' Overdraft Fees" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/overdraft-fees-banks-cfpb/#webpage", "url": "https://money.com/overdraft-fees-banks-cfpb/", "name": "Inside the Biden Administration's Plan to Stop 'Out-of-Control' Overdraft Fees", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2024-01-17T16:48:50.000Z", "mainEntity": { "@id": "https://money.com/overdraft-fees-banks-cfpb/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/overdraft-fees-banks-cfpb/#breadcrumb" }, "dateModified": "2024-01-17T16:48:50.000Z" }, { "@type": "NewsArticle", "headline": "Inside the Biden Administration's Plan to Stop 'Out-of-Control' Overdraft Fees", "articleSection": "Banking", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2024/01/News-CFPB-Overdraft-Fees.jpg", "width": 2880, "height": 1920, "caption": "News-CFPB-Overdraft-Fees" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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