WASHINGTON (NEXSTAR) – The Biden administration is launching a proposal that could cut overdraft fees by more than half, according to the White House.
In a statement released by the White House Wednesday, President Joe Biden said, “For too long, some banks have charged exorbitant overdraft fees- sometimes $30 or more-that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines.”
The change could drop overdraft fees to as low as $3, potentially causing some of the country’s biggest banks to lose billions of dollars in earnings from those fees.
“The average family that gets hit with overdraft fees might save up to $150 with this proposal,” Rohit Chopra Director of the Consumer Financial Protection Bureau (CFPB) said.
Under the proposal, banks would have to show how much it costs to run overdraft services, or instead charge a benchmark fee.
“Banks would have to treat overdraft loans just like other loans, giving clear disclosures and reasonable limitations on how they assess those fees,” Chopra said.
The rules would apply only to banks with more than $10 billion in assets, sparing small banks and credit unions.
The banking industry is expected to fight the proposed regulations, which could lead to a drawn-out legal battle.
If the rule is adopted, the new regulations would go into effect in October of 2025.
The Associated Press contributed to this report.
