Chicago – Attorney General Kwame Raoul, as part of a coalition of 22 attorneys general, today sent a letter to the leadership of the U.S. House of Representatives and the House Financial Services Committee urging the House to vote against a resolution that would overturn the Consumer Financial Protection Bureau’s (CFPB) 2024 rule limiting overdraft fees imposed by the country’s largest banks. The rule prevents big banks from charging excessive overdraft fees that can hurt their customers’ credit and sometimes lead to account closures.
“Vulnerable families cannot afford the burden of overdraft fees and resulting damage to their credit as they try to pay for necessities on top of additional debt they may have. That is why I am urging the House to vote against the overturning of CFPB’s 2024 rule limiting excessive overdraft fees,” Raoul said. “I will continue to protect consumers in Illinois and across the nation from excessive fees that benefit banks.”
House Joint Resolution 59 would overturn a 2024 rule issued by the CFPB that applies only to banks with over $10 billion in assets. The rule imposes reasonable limits ($5 or the amount of the bank’s actual costs) on the overdraft fees these big banks may charge when customers overdraw their accounts. Nevertheless, late last month, the Senate narrowly passed its version of the resolution overturning the CFPB’s rule by a bipartisan vote of 52-48.
The average overdraft fee imposed by banks is about $35 and is usually significantly larger than the overdraft itself. Overdraft fees are also a major profit center for banks, accounting for about $5.8 billion in revenue in 2023. As Attorney General Raoul and the coalition explain in their letter, under the CFPB’s rule, if banks want to continue to profit from such fees over $5, they must treat them as interest on a loan. Given that most overdraft fees are paid back in less than three days, a typical fee of $35 on an average overdraft of $26 is the equivalent of an annual interest rate of 16,000%.
In the letter, Raoul and the attorneys general argue the CFPB’s rule plays a valuable role in protecting bank customers from excessive and often unexpected charges that can sometimes lead to involuntary account closures, damaging customers’ credit and even driving them out of the banking system altogether. In addition, excessive overdraft fees are unnecessary. As Attorney General Raoul and the coalition point out in the letter, many banks – including Citigroup, Capital One and Ally Bank – have already eliminated overdraft fees while still providing the convenience of overdraft protection.
Joining Raoul in sending this letter are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington and Wisconsin. The Hawaii Office of Consumer Protection also joined the coalition.
