A Consumer Financial Protection Bureau proposal to curb overdraft fees at large banks is encountering stiff resistance from leading bank industry groups, which say the measure would amount to a backdoor usury cap and potentially unconstitutional price control.
The American Bankers Association and other trade groups registered their opposition in comment letters filed this week, warning that the CFPB is wading into off-limits territory with its proposal for tighter regulation of many bank overdraft programs.
Unveiled in January, the CFPB’s proposed rule would treat overdraft service more like a credit card and apply additional compliance requirements unless banks keep their overdraft fees at or below break-even levels, which they could calculate using prescribed guidelines or rely on a $3 to $14 “benchmark.”
The proposed rule would only apply to about 175 “very large financial institutions,” defined as banks and credit unions with more than $10 billion in assets. But when measured against the nearly $33 average overdraft fee, the CFPB has said it “may save consumers $3.5 billion or more in fees per year.”
Bank trade groups, however, say the proposal could have many further-reaching effects, radically altering how overdraft programs operate across banks of all sizes, if they continue to be offered at all.
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