House tees up resolution to nullify CFPB's overdraft cap

Bloomberg News

House Financial Services Committee Chair French Hill has released a discussion draft of a joint resolution that aims to nullify the Consumer Financial Protection Bureau's December rule limiting overdraft fees to $5 in most cases.

The joint resolution would cancel the rule under the Congressional Review Act, which allows Congress to negate an executive rulemaking within 60 legislative days after it is finalized and sent to Congress for review. Under the CRA, a resolution must be passed with a simple majority in both chambers and signed by the president. Rep. Hill, R-Ark., included the joint resolution in a hearing notice posted Friday ahead of a Wednesday hearing entitled "Make Community Banking Great Again," the tagline for Hill's near-term legislative agenda.

The resolution is the first sign that Congress may pursue CRA resolutions to undo some of the Biden administration's regulatory actions, most of which were pursued by the CFPB. CRA resolutions, if enacted, bar the issuing agency from passing another rule in "substantially the same form" as the nullified rule. 

The narrow three-seat majority that the Republican Party holds in the House and a rising populist streak within the GOP have made it unclear whether CRA resolutions would be a viable vehicle for lawmakers to undo Biden-era regulations. 

Consumer-advocacy groups decried Hill's resolution, arguing that overdraft fees — which typically cost $35 — are expensive and regressive, affecting the poorest banking customers the most and serving as a profit center for banks. 

"A $35 overdraft junk fee threatens to exhaust scarce funds needed by struggling households to pay for groceries and gas. These fees, often coming as a surprise, push too many hard-working Americans out of the banking system," said Adam Rust, director of financial services for the Consumer Federation of America. "A vote against the overdraft rule is a decision to prioritize Wall Street's profits above the needs of people living paycheck to paycheck."

Lauren Saunders, associate director at the National Consumer Law Center, said in a statement that members of Congress should side with consumers rather than the banking industry by opposing the CRA resolution.

"Why would members of Congress side with big banks that take billions from people struggling with high prices and stop a rule that will reduce most overdraft fees from $35 to $5?" Saunders said. "Regardless of their political affiliation, voters didn't send Representatives to Washington to enable big banks to stick it to their customers with excessive overdraft fees."

Politics and policy

CFPB rules, M&A standards most likely CRA repeal targets

January 9, 2025 8:00 AM

  
The CFPB rule caps overdraft fees for banks with more than $10 billion of assets at $5, a level commensurate with what the CFPB estimates would be necessary to cover the service's cost to banks. Banks would be able to comply with the rule by capping their overdraft fees at a level that covers costs and losses, rendering overdraft a "convenience service rather than a profit center." 

Banks would also be able to comply by disclosing overdraft fees as loans subject to the Truth in Lending Act. TILA requires the disclosure of annual percentage rates, which in some cases could top 16,000% for overdrafts, the bureau estimated.

Banks have railed against the rule, and a coalition of banking trade associations sued the CFPB over what it argued was a statutory overreach in capping fees and filed for an injunction against the bureau for enforcing the rule in December. The lawsuit said overdrafts "are not 'credit,' as customers do not have a right to incur overdrafts or defer repayment of the overdraft [and] as such, they cannot be regulated under TILA." That motion is still pending before the court.