US Bank Regulator Terminates ‘Legal Loophole’ That’s Draining $5,000,000,000 From Customer Accounts Per Year
A US bank regulator says it’s shutting down a “legal loophole” that’s costing customers $5 billion in fees per year.
The Consumer Financial Protection Bureau (CFPB) says a new rule will force large banks to either limit overdraft fees to $5, align them to actual costs and losses, or treat overdraft loans like other credit products.
That would mean the banks have to disclose interest rates, provide account-opening disclosures, and give consumers the choice to opt in or out.
With typical overdraft fees currently clocking in at around $35, the CFPB says the rule will save customers $5 billion annually.
Says CFPB Director Rohit Chopra,
“For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans’ deposit accounts.
The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they’re charging on overdraft loans.”
The new rule applies to banks and credit unions with at least $10 billion in assets, and is set to take effect on October 1st of 2025.
Bank lobbying groups have warned the rule would impact their ability to provide overdraft services to customers, potentially forcing people to use more expensive alternatives such as payday loans.
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