Two House Republicans blasted a proposal released Wednesday by the Consumer Financial Protection Bureau (CFPB) that proposes to reduce what the agency considers unnecessary bank overdraft fees.
of CFPB's proposal It could potentially cut the cost of overdrawing money from a bank account to as little as $3, a move the Biden administration says will reduce costs for working families. But Republican Sens. Patrick McHenry (North Carolina) and Andy Barr (Kentucky) argued that the new proposal would only harm consumers in the long run.
“The proposed rule the CFPB announced today undermines the agency's consumer protection mission,” the lawmakers said. stated in a statement. “The Biden administration’s attempts to mandate one-size-fits-all consumer financial products and services will undermine financial inclusion, limit consumer choice, stifle innovation, and ultimately This will increase banking costs.”
“This proposed rule would further reduce access to short-term liquidity products that millions of Americans rely on to make ends meet. We call on them to withdraw this false proposal, which harms the very consumers it was founded for.”
Banks typically charge overdraft fees when a customer's bank account drops below zero. The Biden administration claims banks are using these fees to make more money from consumers.
Cutting overdraft fees would reduce the revenue banks typically earn from fees. The CFPB says the fees can be up to $35, even though the average debit card overdraft amount by a consumer is less than $26. The proposal would only apply to institutions with assets exceeding $10 billion.
The Biden administration has been working to eliminate so-called “junk” fees and other unnecessary fees as part of its long-term economic agenda. Under the CFPB's proposal, banks would only be able to charge consumers the amount they break even on providing overdraft services.
This means banks must disclose to federal agencies how much it costs to provide their services. If banks do not wish to disclose their costs, they may instead comply with benchmark fees set by the CFPB under the proposal.
The CFPB proposed four benchmark fees that banks could potentially charge for overdraft services: $3, $6, $7, and $14. The department is seeking input from public and banking institutions to finalize the standard fee.
“For too long, some banks have been charging exorbitant overdraft fees (more than $30 in some cases), allowing banks to inflate their profits even as the most vulnerable Americans People are often hit hardest. Banks call it servicing, I call it exploitation,” President Biden said. In a statement Wednesday.
“Today's proposal would cut average overdraft fees by more than half, saving the typical American family who pays $150 a year in these fees. This would save families $3.5 billion each year. “Unfortunately, some Republicans in Congress continue to defend these predatory fees,” he continued.
Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, also expressed optimism about the proposal.
“I am pleased to see the CFPB continue its efforts to eliminate junk fees so that Americans can keep more of their hard-earned money. I will consider this important proposal. ” Brown said in a statement.
Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
