Banking and Finance Law Daily Wrap Up, CHECKS AND ELECTRONIC TRANSFERS—Senate votes to overturn CFPB overdraft fee cap, (Mar 28, 2025)

By Steven Melendez

The move drew praise from banking groups but criticism from consumer associations and Senate Democrats.

The Senate voted 52-48 in favor of a resolution to overturn a Consumer Financial Protection Bureau's cap on overdraft fees finalized in December 2024. The resolution under the Congressional Review Act cleared the Senate by a 52-48 vote, and now awaits action in the House, where a corresponding bill passed the Committee on Financial Services on March 5 (see Banking and Finance Law Daily, Mar. 6, 2025). If passed, the bill would eliminate a $5 cap on overdraft fees assessed by banks and credit unions with assets of more than $10 billion that was slated to go into effect Oct. 1, 2025.

Support for Senate resolution. The CFPB had estimated the rule would save consumers $5 billion per year. But the rule had been criticized by Republicans and banking associations who said it would limit consumer access to checking accounts and take away their ability to use overdraft protection in tight situations.

"To do the right thing for the working class is to give them all the options and let them decide," said Sen. Tim Scott (R-S.C.), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, who first introduced the resolution in the Senate. "Trust them with their own resources."

The Consumer Bankers Association (CBA) praised the Senate for passing the resolution, urging the House to quickly pass it as well. “We commend Senate Republicans for voting to protect consumers’ access to overdraft services—particularly those who lack access to credit and use overdraft to pay for necessities like food and utilities," said CBA President and CEO Lindsey Johnson. “This effort to invalidate the [Rohit] Chopra CFPB’s overdraft rule underscores the serious concerns lawmakers have about how this Biden-era rule will negatively impact millions of Americans’ ability to manage their own finances and the long-term damage that government-imposed price controls have on a highly-competitive financial services market."

The Independent Community Bankers of America (ICBA) also praised the resolution, saying the CFPB rule had exceeded the agency's legal authority. The CFPB overdraft rule would have harmful unintended consequences on all institutions and the consumers and local communities they serve," said ICBA President and CEO Rebeca Romero Rainey. "Further, the CFPB’s overdraft rule exceeds the bureau’s statutory authority under the Truth in Lending Act and violates existing regulations that have determined overdrafts are not extensions of credit."

The American Bankers Association warned that without the rule being overturned, more consumers would be forced to turn to riskier alternative lenders. “Without access to overdraft protection, many Americans would be driven to less regulated and higher risk non-bank lenders to cover unexpected or emergency expenses," said ABA President and CEO Rob Nichols. "If implemented, the CFPB’s eleventh-hour rule imposing government price controls would force many banks to limit or eliminate overdraft protection as we know it. In adopting the rule, the Bureau ignored the majority of Americans who have consistently said they value the service and think it’s reasonable for banks to charge a fee for overdrafts."

Opposition. Senate Democrats, meanwhile, criticized the resolution, saying it's aimed at protecting banks rather than consumers. “I spent years fighting to cap overdraft fees at $5," said Sen. Raphael Warnock (D-Ga.) "That cap is finally announced and months away from giving ordinary people some breathing room by saving them some $5 billion a year in overdraft fees, but now, Washington Republicans are serving wealthy banks instead of the working people."

Sen. Dick Durbin (D-Ill.) argued that the resolution is in line with Elon Musk's efforts to reduce the size of government and questioned that large banks, to which the CFPB would apply, wouldn't be able to afford to offer overdraft protection for low fees. “When you crunch the numbers, the Big Banks’ argument that they need to charge people these outrageous fees just does not hold up," he said.

Sen. Ron Wyden (D-Ore.), who publicly backed the CFPB rule, similarly criticized his Republican colleagues for passing the resolution, also tying the move to Musk. "It comes as no surprise that Republicans have once again broken their promise to lower costs and handed big banks a victory on the backs of American families who are already struggling to keep their heads above water due to Trump’s chaos," he said. "Throwing this rule in the trash gives the biggest banks the power to continue charging consumers 5 billion dollars in excessive overdraft fees every year, while Trump and his uber wealthy MAGA friends shamefully showboat their newly purchased Teslas from the richest man alive.”

Consumer advocacy groups also criticized the resolution, with Americans for Financial Reform saying the CFPB rule would save families who pay overdraft fees an average of $225 per year. “Today’s vote is a betrayal of families, service members, and working people who live paycheck to paycheck,” said Patrick Woodall, managing director for policy at Americans for Financial Reform. “Overdraft fees are nothing more than an attempt by big banks to pad their profits at the expense of consumers.”

And Consumer Reports argued that today's overdraft fee structures exceed the cost to banks to provide the service, which the organization said is typically used for amounts less than $26 and repaid in three days. “Too many banks and credit unions pad their profits by charging excessive overdraft fees that make it harder for economically vulnerable consumers to make ends meet,” said Chuck Bell, advocacy program director at Consumer Reports. “The CFPB’s rule imposes reasonable limits that protect consumers from unfair fees while enabling banks to cover their costs. Repealing the CFPB’s overdraft fee limits will hurt working families who are already struggling with high prices and inflation.”

The Consumer Federation of America also critiqued the resolution as looking to overturn a rule that promotes fairness to consumers. “Banking charters were never supposed to be a license to rip people off, but unfortunately, many banks rely on gotcha penalty fees to pad their profits, effectively diminishing the difference between insured depositories and payday lenders," said Adam Rust, director of financial services for the Consumer Federation of America. "Reversing this rule is a gift to banks, and if the House goes forward with their version, it will harm people for decades to come.”

Companies: American Bankers Association; Americans Financial Reform; Consumer Bankers Association; Consumer Federation of America; Consumer Reports; Independent Community Bankers of America

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