Reps. Maxine Waters (D-Calif.), Patrick McHenry (R-N.C.), and Andy Barr (R-Ky.), as well as Sen. Sherrod Brown (D-Ohio), all gave their reactions to the Consumer Financial Protection Bureau’s (CFPB) proposed rule related to overdraft fees.
The rule is meant to rein in excessive overdraft fees charged by banks by closing a loophole in the Truth in Lending Act.
“I’m glad to see the CFPB continue its work to eliminate junk fees so that Americans can keep more of their hard-earned money,” Brown said, following with a pledge to review the proposal.
Waters said she applauded CFPB Director Rohit Chopra and the bureau’s staff on their work to combat junk fees.
“For far too long, our nation’s biggest banks charged consumers fees as high as $35 or $40 for briefly overdrawing their account, costing those who can least afford it billions every single year,” Waters said. “In fact, the banking industry has raked in $280 billion the past two decades, including about $9 billion last year, from these exorbitant overdraft fees. “
According to Waters, under the bureau’s new rule, the average overdraft fee would be reduced by more than half, helping about 23 million households save on average $150 every year.
“As the top Democrat on the House Financial Services Committee, I’ve long sounded the alarm and held big banks to task for these abusive and costly fees,” Waters added. “This work, along with research and enforcement actions the CFPB took in recent years resulted in a number of banks reducing their overdraft fees the last few years. I am pleased that the CFPB is building on this progress to ensure more consumers are not charged excessive overdraft fees through this new rule.”
Waters also noted the bureau’s proposed rule is consistent with legislation committee Democrats passed when she chaired the House Financial Services Committee. Then called the Overdraft Protection Act, it included a series of consumer protections that allowed consumers to utilize overdraft programs only if they were charged reasonable and proportionate fees in using the service.
“Every time I talk to constituents in my district or communities across the country, one of the number one concerns I hear is how hard junk fees like overdraft fees are making it for families on already tight budgets to make ends meet,” Waters said. “I commend the CFPB’s commitment to ensuring our financial system works better for all our nation’s consumers, and I look forward to the agency finalizing the rule in short order.”
On the other side of the aisle, McHenry and Barr warned against the new rule, claiming it would undermine the bureau’s consumer protection mission.
“The Biden administration’s attempts to mandate one-size-fits-all consumer financial products and services diminish financial inclusion, limit consumer choice, stifle innovation, and ultimately raise the cost of banking for all consumers,” McHenry and Barr said in a joint statement. “This proposed rule will further reduce access to the short-term liquidity products that millions of Americans rely on to help make ends meet. We urge the CFPB to withdraw this misguided proposal that harms the very consumers the agency was created to protect.”
Want more on the CFPB’s latest rule? Check out Consumer Bankers Association’s Kelvin Chen’s insight in sister publication Dodd Frank Update here.