Rohit Chopra, director of the CFPB, testifies throughout a House Financial Services Committee listening to on June 14, 2023.
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The Consumer Financial Protection Bureau on Thursday introduced the ultimate version of a rule limiting banks’ capacity to cost overdraft charges. It says the rule will save American customers $5 billion yearly.
The regulator mentioned that banks may choose to cost $5 for overdrafts — a steep drop from the common payment of round $35 per transaction — or restrict the payment to an quantity that covers the lenders’ prices, or cost any payment whereas disclosing the rate of interest of the mortgage.
“For far too lengthy, the biggest banks have exploited a authorized loophole that has drained billions of {dollars} from Americans’ deposit accounts,” CFPB Director Rohit Chopra mentioned in a statement. “The CFPB is cracking down on these extreme junk charges and requiring massive banks to come back clear concerning the rate of interest they’re charging on overdraft loans.”
The effort, a part of a flurry of activity from the CFPB within the waning days of the Biden administration, faces stiff opposition from U.S. banking teams which have efficiently stymied different efforts from the regulator. For occasion, a rule capping credit card late charges at $8 per incident that was set to take impact in May has been held up in federal court docket.
The CFPB mentioned that its overdraft rule will take impact Oct. 1, 2025, although its final destiny is unclear.
Even earlier than the election victory of Donald Trump final month, the destiny of the overdraft rule would’ve been murky, because of business pushback. But Trump is anticipated to put in a brand new CFPB head subsequent month that’s unlikely to help Biden-era efforts to rein in banking exercise.
Bank lobbying teams have argued that the overdraft rule, first proposed in January as a part of Biden’s warfare on junk charges, would cut back entry to overdraft providers and will ship prospects to worse options like payday loans.
The Consumer Bankers Association mentioned Thursday it was “exploring all choices” to push again in opposition to the rule.
This story is creating. Please examine again for updates.
