The Defense Credit Union Council, DCUC, commends the U.S. Senate's recent passage of S.J.Res.18, a joint resolution targeting the Consumer Financial Protection Bureau’s (CFPB) final rule on "Overdraft Lending: Very Large Financial Institutions."
"We thank Chairman Tim Scott for his leadership in bringing this critical reform to the CFPB's flawed overdraft fee rule," said Anthony Hernandez, DCUC President & CEO. "This resolution affirms that when regulatory agencies exceed their authority or impose policies that harm consumers, Congress must intervene. Chairman Scott's leadership has ensured that the perspectives of America's hardworking families and community-based financial institutions are heard amongst the national conversation on financial fairness and accessibility."
On Tuesday, DCUC sent a letter to Chairman Tim Scott (R-SC) expressing support for his leadership in introducing a Congressional Review Act (CRA) resolution to overturn the CFPB’s rule and his efforts to bring the measure before the Senate.
DCUC voiced its opposition to the CFPB rule since it was first introduced, sending a letter to the Senate Banking, Housing, and Urban Affairs Committee, both Houses of Congress, and former CFPB Director Rohit Chopra.
"We respectfully request that you oppose the CFPB’s overdraft fee rule and utilize the Congressional Review Act to repeal this blatant overregulation and to ensure that future regulations are appropriately targeted and balanced to preserve access to financial services for all Americans," DCUC wrote to the congressional committee leaders.
DCUC's letters added:
"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. It risks creating a perverse incentive for individuals to overdraft their accounts more frequently, undermining the financial responsibility that overdraft policies are designed to encourage.
Worse, without any safety net that would allow consumers to keep payments on time, this rule risks more decline rates due to non-sufficient funds. These can result in higher penalties from non-bank entities such as landlords, utility companies, and even municipalities. Instead of addressing cases of actual abuse, this sweeping regulation penalizes the entire financial sector indiscriminately. Such an approach fails to distinguish between responsible institutions, such as credit unions, and bad actors who may engage in exploitative practices. By forcing credit unions to absorb the costs of overdraft protection, this rule jeopardizes their ability to reinvest in their communities and provide low-cost financial services to their members—many of whom are active-duty military personnel, veterans, and their families.
Furthermore, we are concerned that this rule will have the opposite of its intended effect. Limiting overdraft fees to such an extent may incentivize consumers to overdraft their accounts more frequently, undermining the financial stability of individuals and credit unions alike. When these consequences inevitably materialize, the CFPB will likely seek to impose additional regulations, exacerbating the already burdensome regulatory environment for credit unions."
The CFPB's rule applied to financial institutions with more than $10 billion in assets, and mandated that these institutions either cap most overdraft fees at $5 or treat overdraft programs as credit under the Truth in Lending Act (TILA).
Prior to today's vote on the Senate floor, the bill gained bipartisan support from Senators Mike Rounds [R-SD]; Bill Hagerty [R-TN]; Mike Crapo [R-ID]; Thomas Tillis (R-NC); Kevin Cramer (R-ND); Katie Boyd Britt (R-AL); Jerry Moran (R-KS); James Risch (R-ID); John Boozman (R-AR); Roger Wicker (R-MS); Cynthia Lummis (R-WY); Pete Ricketts (R-NE); Bernie Moreno (R-OH); Mike Lee (R-UT); Steve Daines (R-MT); and John Thune (R-SD).
For more information, please see attached DCUC's official release and letter. Thank you.