Banks and credit unions said Thursday they plan to sue the federal Consumer Financial Protection Bureau for adopting that would limit overdraft fees. File Photo by Billie Jean Shaw/UPI
Dec. 13 (UPI) — Banking groups said they plan to sue the federal Consumer Financial Protection Bureau for adopting a rule that would limit overdraft fees.
The Consumer Bankers Association, American Bankers Association, America’s Credit Unions, and the Mississippi Bankers Association filed the suit Thursday, arguing their billions in profits from overdraft fees “are an essential lifeline for consumers when they experience unexpected expenses.”
“Without overdraft services, consumers on the margins are more likely to turn toward worse, less-regulated non-banking services to fill the gap,” Consumer Bankers Association President and CEO Lindsey Johnson said in a statement.
The groups said the final rule introduced by the CFPB on Thursday, “exceeds its regulatory authority.”
“More importantly, the CFPB fails to appropriately consider how its actions will harm the consumers who most benefit from the access to the liquidity enabled by overdraft services,” they wrote.
The CFPB said the rule brings overdraft loan fees into compliance with the Truth In Lending Act while still allowing sufficient fees to banks and credit union overdraft loans.
It added that overdraft fees added $5.8 billion in expenses for bank and credit union customers in 2023.
“For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans’ deposit accounts,” said CFPB Director Rohit Chopra in a statement. “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.”
President Joe Biden proposed the new rule on overdraft fees in January, saying “banks call it a service — I call it exploitation.”
America’s Credit Unions President and CEO Jim Nussle said in a statement that the new CFPB saving consumers billions ” threatens to eliminate financial protections for consumers.”
The rule does not eliminate the fees but gives banks and credit unions options of charging low fees just enough to cover their costs or to continue to profit from charging the fees as long as they comply with the Truth In Lending Act.
“The CFPB’s final overdraft rule exceeds the Bureau’s statutory authority, ignores thoughtful industry and stakeholder feedback, and will harm the very consumers the CFPB claims to protect,” ABA President and CEO Rob Nichols said in a statement.