The Consumer Financial Protection Bureau (CFPB) has announced final regulations to curb excessive overdraft fees.
The new rule applies to domestic banks and credit unions with assets exceeding $10 billion and will take effect on October 1, 2025. The CFPB estimates that the regulation could save consumers up to $5 billion annually, or approximately $225 per household.
The CFPB criticized large banks for exploiting legal loopholes to generate substantial profits from overdraft fees. Under the new regulation, institutions must disclose fees transparently and limit them to fair levels.
The rule caps overdraft fees at $5 for banks with assets over $10 billion. Currently, the average fee charged by banks is $35, meaning a reduction of $30.
Banks wishing to charge fees above $5 must base them on the actual costs and losses incurred. However, if a bank chooses to generate profits through overdraft fees, the fees will be classified as “financial products,” requiring banks to provide consumers with the option to opt-in and to issue regular statements subject to oversight.
The CFPB highlighted previous actions, such as ordering Wells Fargo and other large banks to refund $405 million in overdraft fees, as part of its broader efforts to eliminate junk fees.
“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. “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.”
Among Korean American banks, only Bank of Hope, with assets exceeding $10 billion, is expected to be affected by the rule. Joyce Park, Deposit Operations Manager at Bank of Hope, stated, “Currently, the fee charged when accounts lack sufficient funds is $33. We will adjust our fees in line with the detailed guidelines provided by regulatory authorities.”
However, some experts question whether the regulation will be fully implemented. If former President Donald Trump returns to the White House, it is highly likely he will significantly reduce the CFPB’s authority. Trump had already scaled back the agency’s powers during his first term.
Adding to the uncertainty, Elon Musk, CEO of Tesla and a close ally of Trump who is set to lead the Department of Government Efficiency (DOGE), has publicly expressed his belief that “redundant regulatory agencies like the CFPB should be abolished.”
An industry insider commented, “Regulations that harm bank profitability may conflict with the pro-business stance of a Trump administration. There is a possibility the rule could be repealed before implementation.”
BY WONHEE CHO [cho.wonhee@koreadaily.com]
