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Biden Administration Proposes Rule to Limit Overdraft Fees

The proposed rule, which could take effect in October 2025, faces opposition from bank trade groups but support from consumer advocacy groups.

FILE - Consumer credit cards are posed in North Andover, Mass., March 5, 2012. The Consumer Financial Protection Bureau is expected to propose rules this week that further rein in banks’ ability to charge customers a fee when they overdraw their bank account. Opponents of the fees often cite the example of a $3 cup of coffee costing someone $40. (AP Photo/Elise Amendola, File)
President Joe Biden speaks while visiting firefighters at the Allentown Fire Training Academy, Friday, Jan. 12, 2024, in Allentown, Pa.
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A seal at the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C. (Samuel Corum/Bloomberg via Getty Images)

Overview

  • The Biden administration has proposed a rule that would limit overdraft fees charged by banks, which currently collect about $9 billion annually from such fees.
  • The proposed rule would treat overdraft programs as credit programs, requiring them to abide by the same requirements that apply to credit cards, such as disclosure of annual interest rates, fee limits in the first year, and reasonable penalty fees.
  • The rule would apply to banks and credit unions with more than $10 billion in assets and could take effect in October 2025 if approved.
  • Bank trade groups have criticized the proposal, arguing that it overlooks voluntary changes banks have made in recent years and could push consumers into the hands of less-regulated, more-costly alternatives.
  • Consumer advocacy groups support the rule, accusing banks of profiting off financially insecure customers burdened by overdraft fees.