Reversed bank policy: Essential facts for consumers to understand about overdraft protection changes
The Consumer Financial Protection Bureau's (CFPB) rule to limit overdraft fees for large banks and credit unions, which was finalized in 2024 and aimed to cap overdraft fees at $5, has been overturned.
On May 12, 2025, President Trump signed a joint resolution passed by Congress disapproving the rule, effectively voiding it. The CFPB stated it does not intend to reissue or revise this overdraft rule following the nullification.
As a result, large financial institutions are not under rule-based restrictions from the CFPB limiting overdraft fee practices as envisioned by the 2024 rule. This means consumers may continue to face overdraft fees up to $35 per instance in a single day, without the new limitations the CFPB had sought to enact.
The overturned rule could potentially hurt consumers, according to Mike Litt with the U.S. Public Interest Research Group (PIRG). He explained that these fees can add up quickly and disproportionately affect individuals living paycheck to paycheck. The CFPB estimated that this rule could have saved consumers $5 billion annually.
Senator Tim Scott, who led the effort to overturn the rule, argued that it would be good for consumers. He stated that when constrained by fee caps, banks reduce overdraft coverage and deposit supply, causing more return checks and a decline in account ownerships among low-income households.
However, industry groups have expressed concerns about CFPB overreach in the overdraft rulemaking, questioning whether overdraft fees should be regulated under credit disclosure laws since overdrafts do not fit traditional credit definitions.
Consumers who believe they have been incorrectly charged an overdraft fee are encouraged to file a complaint with the CFPB. It's also advisable for individuals to check if they are enrolled in overdraft coverage to avoid their debit card being declined if their account balance drops too low.
In the absence of the 2024 rule, it remains crucial for consumers to monitor their accounts closely and consider signing up for low balance alerts to receive a text or email when an account falls below a certain amount. The nullification of the overdraft fee rule leaves overdraft fee regulation in a status quo state without the intended new consumer protections.
In the face of the nullification of the CFPB's overdraft rule in 2025, large businesses in the finance sector continue to charge overdraft fees up to $35 per instance without the $5 limit intended to protect consumers. Political decisions overturning the rule could potentially harm consumers, as pointed out by Mike Litt from the U.S. Public Interest Research Group, who said these fees disproportionately impact people living paycheck to paycheck.
