Banking and Finance Law Daily Wrap Up, CHECKS AND ELECTRONIC TRANSFERS—Pending vote to overturn CFPB overdraft rule prompts varied reactions, (Mar 5, 2025)

By Joe Cox, J.D.

The House Financial Services Committee will consider legislation to overturn a December 2024 Final Rule limiting large bank overdraft fees and imposing oversight on non-bank service providers.

Ahead of a vote on Wednesday to move forward a bill overturning a Consumer Financial Protection Bureau final rule limiting overdraft fees of large banks and imposing oversight on non-bank service providers, several proponents and critics of the bill have issued statements. The rule in question, finalized in December 2024, most notably limited large banks to $5 overdraft fees, down from the typical $35 per transaction. Republican leaders have previously criticized the rule, arguing that it may ultimately harm consumers. The rule is scheduled to take effect Oct. 1, 2025, but Wednesday's anticipated vote could be a step toward the rule being reversed.

Background. In issuing the final rule in December, then-CFPB Director Rohit Chopra praised the Rule as eliminating an "outsized overdraft loophole that exempted over draft loans from lending laws." The Rule impacted banks and credit unions with over $10 billion in assets. The CFPB estimated the proposal as providing $5 billion in annual savings to consumers (see Banking and Finance Law Daily, Dec. 12, 2024).

In February, House Financial Services Committee chairman French Hill introduced the Congressional Review Act to overturn the Final Rule. Republican argued that the limitations on overdraft fees would cause lenders to limit or eliminate overdraft support to clients. At the same time, several consumer groups criticized efforts to repeal the Final Rule as allowing lenders to gouge economically vulnerable consumers (see Banking and Finance Law Daily, Feb. 14, 2025).

Enaction of the Congressional Review Act would also undo the larger participant rule, which increased oversight non-bank companies providing financial services.

Opposition to rule repeal. A group of 276 different organizations submitted a letter to Congress urging it to leave the Final Rule intact. "Banks should not profit off the struggles of working families through excessive, back-end overdraft junk fees," states the letter. In an accompanying press release, Lauren Sanders, the associate director of the National Consumer Law Center, noted, "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."

Another group of over 110 organizations sent a similar missive to the Senate against the efforts opposing the legislation. The Congressional Review Act also would overturn the larger participant rule, which would the organizations noted would increase oversight on Elon Musk's X Money, as well as other non-bank financial service providers. It is that issue which the letter in question raises. "The millions of people who use digital payment apps are vulnerable to fraud, unauthorized transactions, commodification of their sensitive personal information, and having their accounts deactivated or frozen, often without notice or explanation," notes the letter, which urges the Senate to "make sure that [entities like X Money] comply with the law."

“The Senate should reject this colossal giveaway to Big Tech that literally enriches Elon Musk and rewards him and his assault on the CFPB, federal workers, and democracy itself,” said Patrick Woodall, managing director for policy at Americans for Financial Reform, in an accompanying press release.

Support for rule repeal. The Independent Community Bankers of America wrote to House Financial Services Committee leaders French Hill (R-Ark.) and Maxine Waters (D-Calif.) in support of the Congressional Review Act and the repeal of the Final Rule regarding overdraft fees.

"Community banks offer many forms of overdraft protection services to address a variety of consumer needs in a highly competitive financial services marketplace," states ICBA President and CEO Rebeca Romero Rainey. "These services play a valuable role in bringing consumers into the banking system and offer them alternatives to payday loans and nontraditional loan products and the harmful consequences often associated with them."

The ICBA charges that the Rule "would disrupt the competitive marketplace in which community banks operate…. [and] may not only reduce access to services but could create a chilling effect on financial inclusion efforts."

Companies: Americans Financial Reform; Independent Community Bankers of America; National Consumer Law Center

LegislativeActivity: BankingOperations CFPB ConsumerCredit CreditDebitGiftCards ChecksElectronicTransfers OversightInvestigations PrudentialRegulation TruthInLending