Biden Admin Seeks to Reduce Bank Overdraft Fees With New Proposal

Biden Admin Seeks , to Reduce Bank Overdraft Fees , With New Proposal.

CNBC reports that the Consumer Financial Protection Bureau (CFPB) has unveiled long-awaited updates to how major banks structure their overdraft protection plans.

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CNBC reports that the Consumer Financial Protection Bureau (CFPB) has unveiled long-awaited updates to how major banks structure their overdraft protection plans.

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According to the CFPB, the new rule closes a loophole that has exempted overdraft loans from consumer protections required by 1968's Truth and Lending Act.

According to the CFPB, the new rule closes a loophole that has exempted overdraft loans from consumer protections required by 1968's Truth and Lending Act.

CFPB data shows that U.S. consumers have paid an estimated $280 billion in bank overdraft fees since 2000.

Over that same period of time, major banks' annual revenue from overdraft fees has soared.

For too long, some banks have charged exorbitant overdraft fees— sometimes $30 or more—that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines, Joe Biden, President of the United States, via CNBC.

Banks call it a service — I call it exploitation, Joe Biden, President of the United States, via CNBC.

The CFPB said that the new regulations only affect banks with over $10 billion in assets, impacting about 175 institutions across the country.

The new rules, including several potential benchmark rates ranging from $3 to $14 per transaction, are reportedly expected to be completed this year and go into effect by October 2025.

CNBC reports that the new rules would provide major banks two options, including offering overdraft coverage as a courtesy service, as opposed to a revenue-generating line of credit.

Under the second option, banks could offer overdraft loans for profit as long as they treat the funds as credit line loans, which would subject them to Truth in Lending Act regulations