Trump enacts legislation revoking the CFPB overdraft regulation
The Consumer Financial Protection Bureau's (CFPB) overdraft fee rule, designed to cap overdraft fees for banks and credit unions with more than $10 billion in assets, has been overturned by a Congressional Review Act (CRA) resolution signed by President Trump in May 2025.
The rule, which was set to take effect in October 2025, aimed to protect consumers from excessive fees charged by large financial institutions. It proposed capping overdraft fees at $5 or requiring fees to be based on a breakeven standard reflecting actual costs and losses incurred by the institution. Additionally, it would have treated overdraft services as credit under the Truth in Lending Act, imposing greater consumer protections and disclosures.
However, the rule was overturned, effectively blocking the CFPB from reissuing a similar rule in the future. This rollback has significant implications:
1. **Banks and credit unions with over $10 billion in assets are no longer subject to the overdraft fee cap or breakeven cost standard**, allowing them to continue charging higher, often opaque overdraft fees. 2. Consumer advocacy groups estimate this rollback could cost Americans **upwards of $15 billion annually** in excess overdraft fees. 3. Some states have begun pursuing their own legislation to restrict overdraft fees in the absence of federal regulation. 4. The decision to overturn the rule also led to the CFPB dropping enforcement actions related to overdraft fees. For example, the CFPB dismissed a $95 million overdraft fee case against Navy Federal Credit Union.
The background to this decision includes the broader shift in federal agency authority following the U.S. Supreme Court’s June 2024 decision striking down Chevron deference. This ruling reduced the deference courts give to agency interpretations of ambiguous statutes, complicating the CFPB’s ability to enforce broad regulatory rules like the overdraft fee rule.
The trade groups, including the American Bankers Association and the Independent Community Bankers of America, had argued that the CFPB's rule exceeded its statutory authority under the Truth in Lending Act and violated existing regulations.
This overturning of the rule preserves the status quo for large banks and credit unions but raises concerns about increased consumer costs and regulatory uncertainty. Meanwhile, some states and consumer advocates continue pushing for overdraft fee limits in the absence of federal rules.
In light of the overturning of the Consumer Financial Protection Bureau's (CFPB) overdraft fee rule, banks and credit unions with over $10 billion in assets are no longer subject to the cap on overdraft fees or the breakeven cost standard, potentially leading to continued charging of higher, often opaque overdraft fees. This rollback could cost Americans upwards of $15 billion annually in excess overdraft fees. Some states have begun pursuing their own policy-and-legislation to restrict overdraft fees in the absence of federal regulation, indicating a potential shift in politics and general-news towards greater protection for consumers in the banking-and-insurance industry and finance.
