US Watchdog Caps Bank Overdraft Fees Amid Industry Objections
The CFPB has capped bank overdraft fees at $5, a move aimed at saving consumers $5 billion annually and addressing a decades-old loophole, despite strong industry opposition.
Published on March 28, 2025
The Consumer Financial Protection Bureau (CFPB) finalized a rule on December 12, 2024, capping overdraft fees at $5 for banks and credit unions with assets above $10 billion. The new regulation, which addresses a longstanding loophole from the 1960s, offers banks three options: charge a flat fee, apply a fee that covers the actual costs and losses, or maintain their existing fee structure provided that all terms are fully disclosed. This move is expected to save consumers approximately $5 billion annually, with over 23 million households affected by such fees as of 2019.
CFPB Director Rohit Chopra stated that the measure is a critical step toward ending excessive fee practices and enhancing transparency in consumer lending. Despite strong opposition from the banking industry—including legal challenges from key trade groups—the rule reclassifies overdraft fees as short-term loans under the Truth in Lending Act. The new regulation is set to take effect in October 2025, marking a significant change in the way banks handle overdrafts in the United States.