House votes to overturn Biden-era rule limiting bank overdraft fees to
$5, sends to Trump to sign
[April 10, 2025] By
CORA LEWIS and MARY CLARE JALONICK
NEW YORK (AP) — The House voted Wednesday to overturn a rule that would
have limited bank overdraft fees to $5, following the Senate in moving
to dismantle the regulation that the Biden administration had estimated
would save consumers billions of dollars.
The resolution killing the rule, which passed the House 217-211, will
now head to the White House for President Donald Trump's signature.
Republicans argued that the “disastrous” regulation issued in the final
days of President Joe Biden's term would have forced banks to stop
offering overdraft protection altogether and made it harder for
Americans to access credit.
“Competition and innovation, not government-mandated price caps, remain
the best way to ensure consumers have access to affordable financial
products and services,” said Arkansas Rep. French Hill, the chairman of
the House Financial Services Committee.
Currently, the nation’s biggest banks take in roughly $8 billion in the
charges every year, according to data from the Consumer Financial
Protection Bureau and bank public records. Right now, there is no cap on
the overdraft fees that banks can legally charge.
Banks and banking groups had previously sued over the rule, arguing that
it would have led to consumers leaning on worse, less-regulated
services. Republicans voted to undo the regulation under the
Congressional Review Act, a 1996 law that allows Congress to reverse
recently adopted rules.
Democrats strongly opposed the effort and said the rule would help
consumers who can't afford the fees. California Rep. Maxine Waters, the
top Democrat on the Financial Services panel, said that Americans are
“fed up with these junk fees" and want to get them under control.
The rule, scheduled to go into effect in October, was part of Biden's
effort to reduce fees that hit consumers on everyday purchases,
including banking services. The CFPB estimated the rule would have saved
consumers about $5 billion in annual overdraft fees, or $225 per
household that typically experiences the fees. Biden had called the
fees, which can be as high as $35 per transaction, “exploitative,” and
consumer advocates point out they hit banks’ most cash-strapped
customers.
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 The Republican effort to overturn
the rule is “shamefully targeting the American people," said Rep.
Rashida Tlaib, D-Mich.
When a bank temporarily lends a consumer money after their account
has reached a zero balance, the consumer is typically responsible
for paying back both the overdrawn amount and an additional fee,
which can be more than the original amount charged. In one example,
a $3 cup of coffee can end up costing someone more than $30.
Overdraft fees originated during a time when consumers wrote and
cashed checks more frequently — so that the checks would clear
instead of bouncing, if there was an issue of timing — but banks
steadily increased the fees in the first two decades of the 2000s. A
majority of overdrafts — about 70% — are charged to customers with
average account balances between $237 and $439, according to the
CFPB.
“The overdraft fee rule close(d) a paper-check era loophole that has
allowed big banks to trick people into paying excessive overdraft
fees and earn billions in profits from some of their most vulnerable
customers,” wrote Chuck Bell, the advocacy program director at
Consumer Reports, in a letter to lawmakers. “Overdraft fees have
morph(ed) from an occasional, ad hoc courtesy provided to consumers
to a line of business.”
Under the finalized rule, banks would have been able to choose from
three options: charging a flat overdraft fee of $5, charging a fee
that covered their costs and losses, or charging any fee so long as
they disclosed the terms of the overdraft loan the way they would
for any other loan, typically expressed as an annual percentage
rate, or APR.
The finalized rule applied to banks and credit unions with more than
$10 billion in assets, which included the nation’s largest banks.
Banks had previously sued the CFPB over these rules and caps on
credit card late fees.
“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 Rob Nichols, American
Banking Association president and CEO, in a statement. Nichols said
the rule could have led banks to “limit or eliminate overdraft
protection as we know it.”
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