WASHINGTON, D.C. (December 12, 2024) |
The Defense Credit Union Council (DCUC) announces its strong opposition to the Consumer Financial Protection Bureau’s (CFPB) new rule issued earlier this morning, which caps overdraft fees at $5— a sharp decrease from the current industry average of $35 per transaction. When announcing the new rule, the CFPB stated it believes the rule “allows consumers to better comparison shop across credit products and provides substantive protections that apply to other consumer credit.”
DCUC responded with letters sent to the House Financial Services Committee, the Senate Banking, Housing, and Urban Affairs Committee, and CFPB Director Rohit Chopra, view here. In today’s letters, DCUC reiterates its significant concerns about the overregulation of overdraft fees, pushing consumers toward higher-cost alternatives, such as payday loans, and ultimately, encouraging counterproductive overdraft activity.
“The imposition of a $5 cap on overdraft fees disregards the operational realities of financial institutions and the costs incurred in providing overdraft protection services. This policy not only jeopardizes the sustainability of these services but also shifts the financial burden back onto consumers in unintended ways.”
DCUC added that the new rule invites “a perverse incentive for individuals to overdraft their accounts more frequently, undermining the financial responsibility that overdraft policies are designed to encourage,” and without any safety net allowing consumers to keep payments on time, the rule “risks more decline rates due to non-sufficient funds (NSFs),” potentially resulting in higher penalties from non-bank entities such as landlords, utility companies, and municipalities.
“Burdensome regulations like this eliminate valuable programs that have historically protected consumers and encouraged financial readiness responsibility,” said DCUC President/CEO Anthony Hernandez. “There are always unintended consequences when the government oversteps, and I fear this will ultimately harm consumers in the long run.”
Earlier this week ahead of the Senate Banking, Housing, and Urban Affairs Committee hearing, where CFPB Director Rohit Chopra provided testimony, DCUC sent a letter emphasizing the broader trend of overregulation by the CFPB.
"We call attention to the CFPB’s broader trend of overregulation which will weaken financial institutions who are unable to absorb the associated costs,” says Jason Stverak, DCUC Chief Advocacy Officer. “DCUC will continue to call for structural reforms at the CFPB to ensure its accountability, transparency, and balanced oversight of the financial sector. We urge the CFPB to reconsider this rule and for the incoming administration to repeal it immediately.”
The new rule is scheduled to take effect in October 2025 unless repealed by a future administration.
DCUC will continue to emphasize the need to balance consumer protection with policies that support credit unions’ abilities to best serve the financial needs of America’s communities.
For more information, please contact Jason Stverak at jstverak@dcuc.org and visit dcuc.org/advocacy.