- CFPB aims to set caps on overdraft fees for bank customers
- Banks say they’ve already taken steps to reduce customer costs
Banks are sounding the alarm that the Consumer Financial Protection Bureau will contravene its own founding statute if it limits how much they can charge when customers overdraw their accounts.
Their complaints, raised in comments to the agency that closed this week, center on how the CFPB wants to define overdraft accounts in its proposed rule, which is part of the Biden administration’s broader effort to fight so-called “junk fees,” or costs hidden from customers.
The rule would let banks treat the overdraft as a loan to customers that charges interest. But the 2010 Dodd-Frank Act, which created the CFPB, bars the agency from setting interest rates. Banks say the caps on such fees, ranging from $3 to $14, therefore amount to an illegal limit on interest.
Banks could go above the cap only as a “breakeven,” if they show their costs for giving people overdraft protection exceeds the capped amount.
“By imposing additional—and onerous—requirements on overdrafts priced above the breakeven or benchmark fee, the Proposal impermissibly establishes a usury limit,” the American Bankers Association said in a comment letter to the agency.
The banks’ concerns will likely resurface in any litigation challenging the CFPB’s rule once it’s finalized.
Read more in Bloomberg Law