Booker, Van Hollen Lead a Dozen Colleagues to Urge CFPB to Finalize Rule Limiting Overdraft Fees

WASHINGTON, D.C. – Today, U.S. Senators Cory Booker (D-NJ) and Chris Van Hollen (D-MD) led colleagues in writing a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra urging the bureau to finalize their proposed rule to rein in excessive overdraft fees charged by the nation’s largest financial institutions. Last December, CFPB announced they would begin a crackdown on exploitative overdraft fees, and take aim at financial institutions charging overdraft fees on debit card transactions and ATM withdrawals, methods which boost bank profits and whose burdens fall disproportionately on those already living on the financial brink. 

“The largest financial institutions have been abusing overdraft fees for decades. The CFPB’s increased enforcement of illegal overdraft collection and outright deceptive practices has resulted in $3.5 billion in annual savings on overdraft fees thus far. Even so, Americans still have paid an estimated $280 billion in overdraft fees since 2000, $15 billion in 2019 and $9 billion in 2022 alone,” the lawmakers wrote. 

The lawmakers detailed that 10 percent of Americans face overdraft fees annually, with a higher likelihood among young, low-income, Black or Latino individuals, “Black households are 84 percent more likely, and Latino households are 89 percent more likely, to be charged overdraft fees than White households. Of those charged, only half reported that they knew they opted in to overdraft coverage.”

The proposed rule aims to eliminate the loophole that enables banks to exploit the flexible nature of checking accounts, which lack consumer credit protections, despite the Federal Reserve Board recognizing debit cards that access an overdraft line of credit function like credit cards. The rule would extend the consumer credit protections of the Truth in Lending Act (TILA) to debit cards drawing on credit for higher-cost overdraft fees.

The lawmakers continued, “These regulations bring transparency and consumer protections of similar credit offerings when overdraft fees exceed breakeven costs and become a profit center. The proposal is consistent with and helps to fulfill Congress’s intent in passing TILA and amending it over the years to ensure that consumers have critical protections when they are offered credit.”

“A number of banks have taken steps to roll back these practices, and we applaud those actions. However, without the efforts of the Biden Administration in this rulemaking, which will curtail large financial institutions’ ability to exploit vulnerable families’ bank accounts, Americans will continue to face charges of up to $111 a day for low account balances or up to $175 a day on overdraft fees,” the lawmakers concluded. 

The letter is cosigned by U.S. Senators Richard Blumenthal (D-CT), John Fetterman (D-PA), Robert Menendez (D-NJ), Chris Murphy (D-CT), Bernie Sanders (I-VT), Brian Schatz (D-HI), Tina Smith (D-MN), Elizabeth Warren (D-MA), Peter Welch (D-VT), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR), and U.S. Representative Valerie Foushee (D-NC-04). 

Booker has long-targeted overdraft fees charged to consumers by banks. Last year, Booker sent letters to 10 large banks and federal regulators urging them to pause overdraft fees in the aftermath of U.S. bank failures. Booker introduced the Stop Overdraft Profiteering Act in 2018 and again in 2021, which would ban overdraft fees on debit card transactions and ATM withdrawals and limit fees placed for checks and recurring payments. In 2020, Booker filed legislation that would ban exploitative bank overdraft fees for the duration of the Coronavirus public health emergency. Also in 2020, Booker sent a letter to more than a dozen bank CEOs urging them to temporarily ban charging customers burdensome bank overdraft fees during the coronavirus emergency. And in 2017, Booker sought to make public more information about banks overdraft fee practices.

To read the full text of the letter, click here.