What They Are Saying: Setting Government Price Controls on Overdraft Services Ignores Market Realities, Harms Consumers

WASHINGTON, D.C. – Following the release of the Consumer Financial Protection Bureau’s (CFPB) politically-motivated rule to set government price controls on overdraft services, the Consumer Bankers Association (CBA) and other financial trades and banks filed litigation against the CFPB to block the rule. As CBA continues to convey, the CFPB’s final rule exceeds its regulatory authority and fails to appropriately consider how its actions will harm the consumers who most benefit from the access to the liquidity enabled by overdraft services.

Here's what the media, legislators, scholars, and thought leaders are saying about the CFPB’s overdraft rule. In addition, several industry experts filed amici curiae briefs in support of CBA’s motion for a preliminary injunction to stop the overdraft rule from going into effect later this year:

Media

The Wall Street Journal Editorial Board: “Forcing banks to cut their fees, or to offer overdrafts as standardized loans, could prompt many to limit the service, especially to low-income and low-credit customers. That would drive customers in a pinch toward high-interest credit such as payday loans. Payday loans can help cover small, short-term budget gaps, but their 15% to 20% interest rates are much higher than overdraft fees […] Banks have grown familiar with this kind of regulatory ambush during the Obama-Biden years, and the damaged parties had a lawsuit ready as soon as the CFPB finalized its overdraft rule. In their complaint, the Consumer Bankers Association and allies say the agency didn’t weigh the rule’s consequences. It’s a strong claim, since the CFPB admitted to having ‘little reliable quantitative evidence’ about how customers might react […] Like the rest of the Biden Administration’s war on junk fees, the overdraft rule was hatched based on a foregone conclusion.” [The CFPB vs. Checking Accounts, Dec. 25, 2024] 

American Banker: “The incoming Trump administration is expected to seek the repeal of some regulations finalized by the Consumer Financial Protection Bureau […] CFPB Director Rohit Chopra has bombarded the financial industry with a flurry of last-minute rules that have drawn the ire of banks and congressional Republicans. Agency rules that get overturned by Congress using the CRA come with a major catch — once the rule is repealed, the agency cannot issue another rule that is ‘substantially the same,’ an issue that could hamstring future directors […] Some experts questioned why the CFPB would finalize a rule capping overdraft fees at $5 in mid-December, which Republicans could easily choose to repeal.” [Recent CFPB rules face repeal with no return under Trump, Jan. 6, 2025]

Legislators

House Financial Services Committee Chairman French Hill (R-Ark.): “Senate Banking Committee Chairman Tim Scott and I were clear when we told federal agencies – including the CFPB – to put their ‘pens down’ and stop all midnight rulemaking. Director Chopra blatantly disregarded our request by finalizing this rule. Capping overdraft services is another form of government price controls that hurts consumers who deserve financial protections and greater choice. As I have said repeatedly, the CFPB needs guardrails on its enforcement and rulemaking powers, and this rule is another clear example of why. The CFPB should answer to Congress just like any other non-independent federal agency, and I will work with Chairman Scott and my fellow Republicans to rein in the agency with statutory direction.” [Statement, Dec. 23, 2024] 

Senate Banking Committee Chairman Tim Scott (R-S.C.): “As I’ve said repeatedly, lawful and contractually agreed upon payment incentives promote financial discipline and responsibility and protect access to important financial services. With just over a month until the next administration takes over, Director Chopra should never have finalized this rule in the first place, and I look forward to working with the next CFPB Director to advance policies that prioritize consumers over political talking points.” [Letter to the CFPB, Dec. 16, 2024]

Scholars and Thought Leaders

Vivek Ramaswamy, Entrepreneur and Incoming Co-Chair of Department of Government Efficiency: “In its 15-year history, the CFPB has consistently adopted policies that have harmed the very consumers they seek to “protect” & a ridiculous midnight-hour rule just pushed out by Biden’s CFPB embodies why. This sweeping regulation, pushed out less than 2 weeks before Christmas by a lame-duck administration, caps overdraft fees & imposes burdensome compliance options on banks, forcing them to cut back on key services for low-income Americans, driving them even further toward payday lenders—the very institutions the CFPB was supposedly created to combat. It’s also an illicit rule because it goes far beyond the scope of what the CFPB was created to regulate in the first place. The new administration can & should nullify this overreach, but we must go further: this latest gambit of the CFPB is just a symptom of a deeper (and unconstitutional) cancer of unelected bureaucrats substituting their policy judgments for those of Congress. That’s un-American & needs to end.” [Post on X, Dec. 26, 2024] 

J. Peter Earle, Senior Economist at the American Institute for Economic Research: “Capping overdraft fees by regulatory fiat is yet another example of regulatory overreach from the Biden administration, as it interrupts the pricing mechanism that reflects the costs and risks of providing overdraft services. It’s not the first time, by far, that the outgoing administration has assumed that government knows better than private enterprises, consumers, and the price system, undermining the voluntary, cooperative commerce that drives competition and innovation.” [Quote in Daily Caller article, Jan. 4, 2025] 

Erik Jaffe, Partner at Schaerr/Jaffe LLP: “The CFPB was given authority to regulate certain circumstances of consumer lending. As a result, the question is whether or not an overdraft on your checking account constitutes a short-term loan […] It seems like quite the stretch. Banks charge customers a fee on overdrafts. The fee is not interest, as the length of time you take to pay back the fee does not change how much you owe. Interest must have a time component to it. It’s not like banks are giving customers with overdrafts money over time. They are just doing a courtesy of not bouncing a charge and embarrassing the customer.” [Quote in Daily Caller article, Jan. 4, 2025] 

E.J. Antoni, Research Fellow at the Heritage Foundation's Grover M. Hermann Center for the Federal Budget: “This is a classic case of government overreach with regulators having no idea how private business works. These new regulations would eliminate certain services and impose stricter rules on bank accounts predominantly held by low-income folks. If those people need an extension of credit because they don’t have sufficient funds to meet an immediate expense, they’ll be driven to even more costly payday lenders.” [Quote in Daily Caller article, Jan. 4, 2025] 

Industry Experts

Bank Policy Institute and Independent Community Bankers of America: “This final rule would require larger banks that choose to charge more than the artificially low cap set by the CFPB to convert discretionary overdraft protection services into a line of credit, subject to all the regulatory requirements and restrictions that come with extending credit to consumers. That fundamental alteration of overdraft protection could severely reduce the availability of these services, harming customers who depend on them—the very population the CFPB purportedly seeks to protect. By imposing these restrictions on those banks’ overdraft protection services, this final rule also hampers those banks’ continued ability to provide free checking accounts and other services valuable to low-deposit consumers.” [Amicus brief, Jan. 7, 2025]

U.S. Chamber of Commerce and Mississippi Economic Council: “The rule effectively requires [very large financial institutions (VLFIs)] to provide discretionary overdraft services at a loss, because the rule limits VLFIs’ charges to either $5 or a supposed “breakeven” cost that inevitably will be less than the actual cost of providing the service. Financial institutions unable to recoup the true cost of honoring overdraft transactions will respond by reducing or ending the service. Consumers, particularly those who rely on overdraft services to purchase necessities, will suffer as a result. While VLFIs could charge a higher overdraft fee by complying with Regulation Z, the resulting service would be an entirely different financial product that would require, among other things, for consumers to satisfy ability-to-pay underwriting requirements. The consumers who depend most on discretionary overdraft services will likely not qualify for this new financial product.” [Amicus brief, Jan. 7, 2025]

The Texas Bankers Association, Louisiana Bankers Association, Arkansas Bankers Association, Florida Bankers Association and the Pennsylvania Bankers Association: “The CFPB has promulgated a rule it has no statutory authority to make and, in fact, is far beyond what the Truth In Lending Act (“TILA”) addresses. Not only is the rule illegal, but it is also arbitrary. Without the CFPB’s attempt at price-fixing, overdraft fees have drastically decreased over the last five years due to market forces alone. The CFPB admits this. Nonetheless, the agency rushed this rule to finality after only a thirty-five-day notice and comment period.” [Amicus brief, Jan. 7, 2025]

Paul Mercer, President of the Ohio Credit Union League: “Consumers and credit unions of all sizes would unintentionally bear the negative brunt of the CFPB’s misdirected rule. The fee cap ignores market realities—overdraft programs are a costly, and mostly break even, service for credit unions. But they are widely used, offering members a lifeline from their trusted financial cooperative when they need it most. We must preserve credit unions’ ability to remain autonomous in serving their members.” [Quote in Credit Union Times article regarding the amicus brief from State Credit Union Leagues & Associations, Jan. 7, 2025]

CBA Advocacy

• To read more about what others are saying about the CFPB’s overdraft rule, click HERE.
• To read CBA President and CEO Lindsey Johnson’s statement on filing litigation against the CFPB overdraft rule, click HERE.
• To read CBA President and CEO Lindsey Johnson’s statement on the CFPB’s overdraft rule, click HERE.
• To get the facts on the value of overdraft services and learn why government mandates are misguided, visit OverdraftFacts.com.
• To view CBA's recent national empirical survey on consumer need for overdraft products, click HERE.
• To read CBA President and CEO Lindsey Johnson's recent written Congressional testimony on why financial regulations should be guided by sound policy, not partisan politics, click HERE. 
• To read CBA's blog post on how limiting overdraft services will hurt consumers, click HERE.