House votes to overturn Biden-era rule limiting bank overdraft fees to $5, sends to Trump to sign

By CORA LEWIS and MARY CLARE JALONICK NEW YORK AP The House voted Wednesday to overturn a rule that would have limited bank overdraft fees to following the Senate in moving to dismantle the regulation that the Biden administration had estimated would save consumers billions of dollars The resolution killing the rule which passed the House - will now head to the White House for President Donald Trump s signature Republicans argued that the disastrous regulation issued in the final days of President Joe Biden s term would have forced banks to stop offering overdraft protection altogether and made it harder for Americans to access credit Competition and innovation not government-mandated price caps remain the best way to ensure consumers have access to affordable financial products and services noted Arkansas Rep French Hill the chairman of the House Financial Services Committee At this time the nation s biggest banks take in roughly billion in the charges every year according to material from the Consumer Financial Protection Bureau and bank society records Right now there is no cap on the overdraft fees that banks can legally charge Banks and banking groups had previously sued over the rule arguing that it would have led to consumers leaning on worse less-regulated services Republicans voted to undo the regulation under the Congressional Review Act a law that allows Congress to reverse just now adopted rules Democrats strongly opposed the effort and commented the rule would help consumers who can t afford the fees California Rep Maxine Waters the top Democrat on the Financial Services panel declared that Americans are fed up with these junk fees and want to get them under control The rule scheduled to go into effect in October was part of Biden s effort to reduce fees that hit consumers on everyday purchases including banking services The CFPB estimated the rule would have saved consumers about billion in annual overdraft fees or per household that typically experiences the fees Biden had called the fees which can be as high as per transaction exploitative and consumer advocates point out they hit banks majority of cash-strapped customers The Republican effort to overturn the rule is shamefully targeting the American people reported Rep Rashida Tlaib D-Mich Related Articles Trump figuring out next approaches in global tariff battle House passes GOP bill requiring proof of US citizenship for voting a Trump priority House approves budget framework for Trump s big bill after intense wrangling sways GOP holdouts Trump s buy tip on social media before his tariffs pause made money for investors who listened Trump lets the water flow again as he reverses Biden rule restricting showerheads When a bank temporarily lends a consumer money after their account has reached a zero balance the consumer is typically responsible for paying back both the overdrawn amount and an additional fee which can be more than the original amount charged In one example a cup of coffee can end up costing someone more than Overdraft fees originated during a time when consumers wrote and cashed checks more frequently so that the checks would clear instead of bouncing if there was an issue of timing but banks steadily increased the fees in the first two decades of the s A majority of overdrafts about are charged to customers with average account balances between and according to the CFPB The overdraft fee rule close d a paper-check era loophole that has allowed big banks to trick people into paying excessive overdraft fees and earn billions in profits from certain of their the majority vulnerable customers wrote Chuck Bell the advocacy scheme director at Consumer Reports in a letter to lawmakers Overdraft fees have morph ed from an occasional ad hoc courtesy provided to consumers to a line of business Under the finalized rule banks would have been able to choose from three options charging a flat overdraft fee of charging a fee that covered their costs and losses or charging any fee so long as they disclosed the terms of the overdraft loan the way they would for any other loan typically expressed as an annual percentage rate or APR The finalized rule applied to banks and credit unions with more than billion in assets which included the nation s largest banks Banks had previously sued the CFPB over these rules and caps on credit card late fees Without access to overdraft protection a large number of Americans would be driven to less regulated and higher vulnerability non-bank lenders to cover unexpected or exigency expenses revealed Rob Nichols American Bankers Association president and CEO in a report Nichols announced the rule could have led banks to limit or eliminate overdraft protection as we know it The Associated Press receives promotion from the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy The independent foundation is separate from Charles Schwab and Co Inc The AP is solely responsible for its journalism