Bank overdraft fees may come down soon. Here’s what you should know.


Tens of millions of Americans who overdraft on Bank accounts May every year soon enjoy great relief.

The government body responsible for protecting consumers’ money has introduced a new rule to curb overdraft fees charged by banks.

Americans have paid nearly $300 billion in overdraft fees over the past two decades, including $9 billion last year. Consumer Financial Protection Bureau He told ABC News in a statement on Wednesday.

Typically, large banks charge $35 per overdraft transaction. The proposed rule could reduce that fee to as much as $3, the CFPB said.

“This is about companies stealing from hard-working Americans just because they can,” President Joe Biden said in a statement about the proposed rule.

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The Consumer Bankers Association, an industry trade group, criticized the proposed rule.

“This proposal to cap overdraft rates is the latest in countless unnecessary and costly regulations by this administration that appear to be guided by political polling, not sound policy established by what should be independent agencies,” the CBA said in a statement. Letters of News.

“The overall costs and impacts of these proposals on Americans’ access to essential financial products and services have not been adequately considered,” CBA added.

Here’s what to know about bank overdraft fees, how the proposed rule could save consumers money and when it would take effect:

How overdraft fees work

For decades, banks have charged overdraft fees to customers who spend more than what they keep in the account at the time.

Under a law passed in the late 1960s, banks faced a public requirement to disclose the cost of lending to the borrower.

At that time, customer payments drawn on bank deposits were usually made through checks sent through the mail.

Overdraft fees became an important source of revenue for large banks in the 1990s and 2000s, as consumers underwent the shift from paper checks to debit cards, the CFPB said. However, companies can impose penalties without the same degree of disclosure as other types of loans.

By 2019, total overdraft fee revenue reached $12.6 billion, paid back by tens of millions of borrowers. Two giant banks, JPMorgan Chase and Wells Fargo, accounted for a third of the overdraft revenue reported by the banks, which amounted to more than $1 billion in fees, the CFPB said.

“Decades ago, overdraft loans received special treatment to make it easier for banks to cover paper checks that were often sent through the mail,” CFPB Director Rohit Chopra said in a statement. “Today, we are proposing rules to close a long-standing loophole that has allowed many large banks to turn overdrafts into a massive machine for collecting unwanted fees.”

Neither Wells Fargo nor JPMorgan Chase immediately responded to ABC News’ request for comment.

Photo: Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB), during a meeting of the Financial Stability Oversight Council (FSOC) at the Treasury Department in Washington, D.C., December 14, 2023. (Al Drago/Bloomberg via Getty) Images

How the rule will reduce overdraft fees

The proposed rule would provide large banks with two options in the event that a customer spends beyond the means available in his account.

First, large banks will retain the ability to make a loan to a customer as long as it complies with existing lending law, including disclosure of relevant interest rates, the CFPB said.

Alternatively, banks can charge fees based on a specific benchmark in line with the amount the bank would need to break even on the transaction, the CFPB said. The proposed rule includes recommended benchmarks ranging from $3 to $14, the agency added, noting a request for comment to arrive at the appropriate amount.

If the agreed upon overdraft fees fall into this range, they will constitute a fraction of the current typical rate of $35 per transaction.

The rule would apply to approximately 175 insured financial institutions with assets exceeding $10 billion, the CFPB said.

When could the new rule take effect?

The proposed rule alerts the public to the agency’s approach to a particular topic, and invites public comment that could be incorporated into the final rule, the CFPB said.

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Ultimately, the final rule must be published in the Federal Register to inform the public and other stakeholders.

The rule goes into effect on October 1 after the final rule has been published in the Federal Register for at least six months, the CFPB said.

The proposed rule on overdraft fees is expected to take effect on October 1, 2025, the agency added.

Customers should remain vigilant in the meantime, said Greg McBride, chief financial analyst at Bankrate.

“It’s too early for consumers to let their guard down when it comes to overdrafts,” McBride told ABC News.

Bank overdraft fees may come down soon. Here’s what you should know. Originally appeared on

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