The long-awaited new overdrafts rule from the CFPB was unveiled immediately.
Since Rohit Chopra took over as head of the CFPB in 2021, they’ve made it clear that they had been going after overdraft charges and this proposed rule is the end result of these efforts.
The proposed rule provides banks two choices on tips on how to strategy overdrafts. First, banks might supply overdraft loans, treating them as a line of credit score, topic to all the foundations within the Reality in Lending Act. Second, they may supply overdrafts as a courtesy service with charges in alignment with their prices, within the vary of $3 to $14.
The brand new guidelines would solely apply to banks with $10 billion in property or extra and aren’t anticipated to enter impact till October 2025.
Business teams will, after all, combat these new guidelines. However many banks have seen the writing on the wall and have already eradicated or lowered overdraft charges.
I’ve written manyinstances about overdraft charges because it is among the most punitive of all banking merchandise with the payment typically exceeding the quantity of the overdraft.
Fintech has taken the lead right here with many corporations providing overdraft alternate options. In truth, I credit score fintech for beginning this whole motion for the novel change to the overdraft panorama.
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