Trump Administration Wants to Let Banks Jack Up Overdraft Fees

Yahoo

18-02-2025

The Trump administration is looking to overturn a Biden-era rule limiting major banks' ability to penalize customers with overdraft fees, a reversal that has major banking associations salivating at the mouth.
Last week, House Financial Service Committee Chair French Hill (R-Ark.) and Senate Banking Committee Chairman Tim Scott (R-S.C.) introduced legislation to repeal the rule, which eliminated junk fees associated with account overdrafting — capping the penalty at $5 — and gave banks several options to manage overdraft costs without placing an excess burden on consumers.
The Trump administration endorsed the legislation on Monday, with Office of Management and Budget Director and Consumer Financial Protection Bureau Interim Director Russ Vought writing on X that he was 'grateful' that the representatives had introduced legislation overturning the rule. 'Passing this important legislation will immediately further President Trump's deregulatory agenda,' he wrote.
At the time the rule was passed, former CFPB Director Rohit Chopra wrote that the directive was expected to 'add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees.'
'Over the past few decades, these highly profitable overdraft loans have increased consumer costs by billions of dollars,' Chopra argued. 'The loans have also led to tens of millions of consumers losing access to banking services, as well as facing negative credit reporting that has prevented them from opening another account in the future.'
The rule angered major banking organizations. In December, the The American Bankers Association sued the Biden administration alongside a coalition of banking groups, accusing the CFPB of exceeding its authority and claiming that the regulations would harm consumers. On Monday, several banking associations once again called on the CFPB to withdraw the rule. In their announcement, Reps. Scott and Hill wrote that they have the 'support of key stakeholders, including the Consumer Bankers Association, Independent Community Bankers of America, American Bankers Association, and America's Credit Unions.'
Under the auspices of Elon Musk's so-called Department of Government Efficiency (DOGE), the CFPB has become a target of the Trump administration's gutting of the federal workforce, which has included regulatory agencies providing oversight to major corporations. In a statement released earlier this month, the White House accused the CFPB of functioning 'as another woke, weaponized arm of the bureaucracy that leverages its power against certain industries and individuals disfavored by so-called 'elites.''
Musk added 'CFPB RIP ' on X, writing that while the organization did 'above zero good things,' they 'still need to go.' Last week, Vought ordered all work at the bureau to cease, pending layoffs at the organization amid efforts to shut it down entirely. Over the weekend, a federal judge blocked the mass firing of CFPB staffers following a union challenge.
Sen. Elizabeth Warren (D-Mass.) torched the administration's actions in a recent interview with Rolling Stone. ' Donald Trump campaigned on lowering costs for working families 'on day one,' she said. 'He is now sidelining the agency that over the last dozen years, has returned $21 billion directly to people who got cheated by giant financial institutions. In other words, his plan is to do nothing on reducing costs, but sure enough, put in place a plan to raise costs for people who are working hardest in our economy.'
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