The Senate voted today in favor of a resolution to overturn the Consumer Financial Protection Bureau’s limit on overdraft fees. Banking Committee Chairman Tim Scott (R-S.C.) introduced the measure to repeal the rule, which was enacted in December last year. The 52-48 vote was along party lines, except for Sen. Josh Hawley (R-Mo.) who voted with Democrats.
This moves the overdraft fee limit a step closer to repeal. Earlier this month, the House Financial Services Committee approved a companion measure from Chair French Hill (R-Ark.) to reverse the rule. A House vote is expected next week.
As it currently stands, the overdraft limit requires banks with at least $10 billion in assets to cap overdraft fees at $5 unless they voluntarily set a cap that covers their actual costs and losses or treat overdraft protection as a loan covered by the Truth in Lending Act. The American Bankers Association last year joined the Mississippi Bankers Association and associations representing bankers and credit unions in challenging the rule in court.
“We applaud today’s Senate passage of the Congressional Review Act resolution nullifying the CFPB’s unlawful overdraft rule and thank Senate Banking Committee Chairman Tim Scott for his leadership on this important issue,” said ABA President and CEO Rob Nichols following the vote. “Without access to overdraft protection, many Americans would be driven to less regulated and higher risk nonbank lenders to cover unexpected or emergency expenses.”
Nichols said the CFPB’s price controls “would force many banks to limit or eliminate overdraft protection as we know it” and that the bureau “ignored the majority of Americans who have consistently said they value the service and think it’s reasonable for banks to charge a fee for overdrafts.”
A new national survey conducted by Morning Consult on behalf of ABA shows that consumers value and understand existing overdraft services offered by financial institutions. Seventy percent find their bank’s overdraft protection valuable, compared with 14% who do not find it valuable, while 68% of consumers think it’s reasonable for banks to charge a fee for an overdraft, as opposed to 23% who think it’s unreasonable.
