A pair of House Republicans bashed a proposal released by the Consumer Financial Protection Bureau (CFPB) Wednesday that suggested slashing what the agency views as unnecessary banking overdraft fees.
The CFPB’s proposal could reduce the cost of overdrawing from a bank account to as little as $3, which the Biden administration has argued would lower costs for working families. However, GOP Reps. Patrick McHenry (N.C.) and Andy Barr (Ky.) claimed the new proposal would only harm consumers in the long run.
“The proposed rule issued today by the CFPB would undermine the Bureau’s consumer protection mission,” the lawmakers said in a statement. “The Biden Administration’s attempts to mandate one-size-fits-all consumer financial products and services diminish financial inclusion, limit consumer choice, stifle innovation, and ultimately raise the cost of banking for all consumers.”
“This proposed rule will further reduce access to the short-term liquidity products that millions of Americans rely on to help make ends meet. We urge the CFPB to withdraw this misguided proposal that harms the very consumers the agency was created to protect,” they added.
Banks typically charge an overdraft fee when a customer’s bank account dips below zero. The Biden administration has argued that banks have been taking advantage of such fees to make more money off consumers.
Cutting down on overdraft fees would reduce revenue the banks typically bring in from the fees. The CFPB says the fees can be as much as $35 even though the average debit card overdrafts by consumers are less than $26. The proposal would only apply to institutions with more than $10 billion in assets.
The Biden administration has worked to eliminate what it calls “junk” 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 that would allow the bank to break even on providing overdraft services.
This would mean that the banks would need to disclose to the federal agency how much it costs for them to provide the services. If the banks do not want to disclose costs, they could instead adhere to a benchmark fee set by the CFPB under the proposal.
CFPB proposed four benchmark fees that banks could potentially charge for an overdraft service: $3, $6, $7 and $14. The bureau is asking for input from the public and banking institutions to finalize a benchmark fee.
“For too long, some banks have charged exorbitant overdraft fees — sometimes $30 or more — that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines. Banks call it a service — I call it exploitation,” President Biden said in a statement Wednesday.
“Today’s proposal would cut the average overdraft fee by more than half, saving the typical American family that pays these fees $150 a year. That would add up to save families $3.5 billion every year. Unfortunately, some Republicans in Congress continue to defend these exploitative fees,” he continued.
Sen. Sherrod Brown (D-Ohio), chair of the Senate Banking Committee, also signaled optimism at the proposal.
“I’m glad to see the CFPB continue its work to eliminate junk fees so that Americans can keep more of their hard-earned money. I will review this important proposal,” Brown said in a statement.