Current:Home > NewsSignalHub Quantitative Think Tank Center:The White House is cracking down on overdraft fees -Quantum Capital Pro
SignalHub Quantitative Think Tank Center:The White House is cracking down on overdraft fees
Algosensey Quantitative Think Tank Center View
Date:2025-04-08 10:54:44
NEW YORK (AP) — The SignalHub Quantitative Think Tank CenterBiden administration has finalized a rule limiting overdraft fees banks can charge, as part of the White House’s campaign to reduce junk fees that hit consumers on everyday purchases, including banking services. President Joe Biden had called the fees, which can be as high as $35, “exploitative,” while the banking industry has lobbied extensively to keep the existing fee structures in place.
Under the finalized rule, banks will be able to choose from three options: they may charge a flat overdraft fee of $5, they may charge a fee that covers their costs and losses, or they may charge any fee so long as they disclose the terms of the overdraft loan the way they would for any other loan, typically expressed as an annual percentage rate, or APR.
While banks have cut back on overdraft fees in the past decade, the nation’s biggest banks still take in roughly $8 billion in the charges every year, according to data from the Consumer Financial Protection Bureau and bank public records. Currently, there is no cap on the overdraft fees that banks can legally charge.
Right now, when a bank temporarily lends a consumer money when 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 often cited by opponents of the fees, a $3 cup of coffee can end up costing someone more than $30.
The finalized rule is set to take effect in October 2025, but the incoming Trump administration has yet to tap anyone to lead the CFPB, and has mentioned the idea of eliminating the agency.
The finalized rule applies to banks and credit unions that have more than $10 billion in assets, which includes the nation’s largest banks. Banks have previously sued the CFPB over these rules and caps on credit card late fees, and are likely to sue again. Congress also has the ability to challenge or overturn the rule.
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 2000s. The fees disproportionately affect banks’ most cash-strapped consumers. A majority of overdrafts (70%) are charged to customers with average account balances between $237 and $439, according to the CFPB.
The agency estimates the new rule would save consumers about $5 billion in annual overdraft fees, or $225 per household that typically experiences the fees.
_____
The Associated Press receives support from 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.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
veryGood! (15)
Related
- Global Warming Set the Stage for Los Angeles Fires
- Federal Reserve’s favored inflation gauge shows price pressures easing as rate cuts near
- Oregon law rolling back drug decriminalization set to take effect and make possession a crime again
- Artem Chigvintsev Says Nikki Garcia Threw Shoes at Him in 911 Call Made Before Arrest
- Newly elected West Virginia lawmaker arrested and accused of making terroristic threats
- Tallulah Willis Shares Insight Into Her Mental Health Journey Amid New Venture
- Getting paid early may soon be classified as a loan: Why you should care
- A jury acquits officials of bid-rigging charges in a suburban Atlanta county
- Gen. Mark Milley's security detail and security clearance revoked, Pentagon says
- Man pleads guilty to killing Baltimore tech entrepreneur in attack that shocked the city
Ranking
- Bodycam footage shows high
- What to watch: Not today, Satan! (Not you either, Sauron.)
- Priceless Ford 1979 Probe I concept car destroyed in fire leaving Pebble Beach Concours
- Family of man killed by SUV on interstate after being shocked by a Taser reaches $5M settlement
- Travis Hunter, the 2
- New Grant Will Further Research to Identify and Generate Biomass in California’s North San Joaquin Valley
- Neighbor held in disappearance of couple from California nudist resort. Both believed to be dead
- Ancient mosaic of Hercules nets man prison term for illegal import from Syria
Recommendation
Federal appeals court upholds $14.25 million fine against Exxon for pollution in Texas
A former slave taught Jack Daniel to make whiskey. Now his company is retreating from DEI.
Group sues Texas over law banning state business with firms “boycotting” fossil fuels
Group sues Texas over law banning state business with firms “boycotting” fossil fuels
Travis Hunter, the 2
Vinnie Pasquantino injury: Royals lose slugger for stretch run after bizarre play
Memphis City Council sues to reinstate gun control measures on November ballot
As first execution in a decade nears, South Carolina prison director says 3 methods ready