Republicans in Congress are trying to overturn a Biden-era rule that would slash excessive overdraft fees charged by big banks.
The House Financial Services Committee voted Wednesday to repeal the rule, which limits most big bank overdraft charges to $5, down from the standard $35 per transaction. Similar legislation has been introduced in the Senate.
The Consumer Financial Protection Bureau announced the rule in December, estimating it would save consumers $5 billion a year and give them more transparent and safer lines of credit.
“Members of Congress should side with voters who are struggling with high prices, not Wells Fargo, Chase and other big banks that reap billions in profits from hidden fees on people trying to make ends meet,” Lauren Saunders, associate director of the National Consumer Law Center, said in a statement. “The CFPB’s overdraft fee rule will stop exploitative practices by big banks, improve transparency, and put $5 billion back into the pockets of everyday people.”
Opponents of the rule say the CFPB overstepped its authority. In a statement, the House Financial Service Committee said the rule hurts banks and consumers because “lawful and contractually agreed upon payment incentives promote financial discipline and responsibility.”
“The Biden Administration’s CFPB routinely targeted legitimate payment incentives and practices in pursuit of political headlines over sound policies,” Senate Banking Committee Chairman Tim Scott (R-South Carolina) said in a statement. “The overdraft rule was yet another example — many consumers rely on overdraft services to make ends meet and limiting this practice will push Americans to riskier financial products.”
But according to a statement filed by the National Consumer Law Center, big banks would be allowed to continue charging fees that are far higher than the actual cost of covering a transaction, multiple times per day. Many banks manipulate the timing of deposits and withdrawals to maximize fees, charging customers even when they have enough money for an approved transaction, the group said.
“Polling is clear: People think $35 overdraft fees are unfair, and banks shouldn’t trick you into paying a $35 fee on the average $23 debit card overdraft repaid in 3 days,” Saunders said.
