A U.S. banking regulator says it is closing a “legal loophole” that costs customers $5 billion in fees a year.
The Consumer Financial Protection Bureau (CFPB) says a new rule will force big banks to cap overdraft fees at $5, tailor them to actual costs and losses, or treat overdraft fees as other credit products.
That would mean banks would have to make interest rates public, provide information about opening accounts and give consumers the choice to opt in or out.
With overdraft fees currently around $35, the CFPB says the rule will save customers $5 billion annually.
Says CFPB Director Rohit Chopra:
“For too long, the largest banks have exploited a legal loophole that has drained billions of dollars from America’s deposit accounts.
The CFPB is cracking down on these excessive junk fees and is requiring major banks to clarify the interest they charge on overdrafts.”
The new rule applies to banks and credit unions with at least $10 billion in assets and will go into effect on October 1, 2025.
Bank lobby groups have warned that the rule would impact their ability to provide overdrafts to customers, potentially forcing people to use more expensive alternatives such as personal loans.
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