In December 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule that closes a loophole exempting overdraft loans from lending laws, a major step in the CFPB's efforts to curb junk fees.
For decades, overdraft loans have not only added billions of dollars to consumer costs but have also caused tens of millions of consumers to lose access to banking services and be faced with negative credit reporting. Starting October 2025, the CFPB's new rule requires financial institutions with over $10 billion in assets to either: 1) cap their overdraft fees at $5; 2) cap their fee at an amount that covers their costs and losses; or 3) comply with the requirements regulating other loans, including providing consumers a choice to open an overdraft line of credit, providing disclosures that would allow comparison shopping, and sending periodic statements. The CFPB estimates that this new rule will provide up to $5 billion in annual overdraft fee savings to consumers.
This rule marks a major step in the CFPB's broader efforts to eliminate junk fees, which has included enforcement actions against large financial institutions as well as rulemaking. Since announcing this initiative, the CFPB has caused financial institutions to refund consumers hundreds of millions of dollars in unlawful fees and multiple banks have reduced or eliminated overdraft fees, saving consumers over $6 billion annually.
The post CFPB Finalizes Rule Preventing Overdraft Fee Loophole for Large Banks appeared first on Consumer Finance Insights (CFI).
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