Fee Fight: GOP Reverses Overdraft Cap, Unraveling Biden-Era Consumer Protections
Congress blocks a rule that would have limited overdraft charges to $5—raising questions about who benefits, who pays, and why American financial policy keeps flipping with every new administration.
By R.L. Crossan
In April 2025, the U.S. House of Representatives voted 217-211 to overturn a Consumer Financial Protection Bureau (CFPB) rule that would have limited bank overdraft fees to $5 per transaction. This decision followed a similar Senate vote and now awaits President Donald Trump's signature. The CFPB estimated that the original rule, set to take effect in October 2025, would have saved consumers approximately $5 billion annually, predominantly benefiting low-income individuals who often face overdraft fees as high as $35 per transaction. apnews.com reuters.com
What Was the Original Policy?
The CFPB's rule applied to banks and credit unions with over $10 billion in assets. It offered institutions three options:
Charge a flat overdraft fee of $5.
Charge a fee that covers their actual costs and losses.
Treat overdraft protection as a loan, complying with lending laws and disclosing terms accordingly. bankingjournal.aba.com apnews.com
The rule aimed to close a loophole that allowed banks to bypass lending laws, leading to excessive fees that disproportionately affected consumers with low account balances. thv11.com
Who Benefits and Who Loses?
Beneficiaries:
Large Financial Institutions: Banks and credit unions can continue charging higher overdraft fees, maintaining a significant revenue stream. cbsnews.com
Consumers Utilizing Overdraft Services: Some argue that without the cap, banks are more likely to offer overdraft protection, providing a safety net for unexpected expenses. consumerfinance.com
Adversely Affected:
Low-Income Consumers: Individuals living paycheck to paycheck may continue to incur high overdraft fees, exacerbating financial strain.
Advocates for Consumer Protections: The reversal is seen as a setback in efforts to eliminate "junk fees" and promote financial fairness.
Why the Policy Reversal?
The use of the Congressional Review Act (CRA) allows Congress to overturn recently adopted regulations. This mechanism has been employed by successive administrations to reverse policies of their predecessors, leading to regulatory instability. Critics argue that such reversals hinder long-term planning and erode public trust in consistent governance. apnews.com