February 8, 2025 / VOLUME NO. 352

The Fate of the Overdraft

The Consumer Financial Protection Bureau announced this week that Treasury Secretary Scott Bessent has become its acting director. One of his first official acts was to halt the work of the agency pending a review. “Bessent and his aides ordered the bureau’s staff in an email to cease crafting regulations, enforcing rules, conducting probes or providing ‘public communications of any type,’” reported The Washington Post. 

Since Donald Trump won the presidency and Republicans gained control over both houses of Congress, commentators have wondered what will happen to rulemaking of all types. Take the finalized overdraft fee rule from the CFPB. By October of this year, banks and credit unions above $10 billion in assets would be required to lower such fees to $5, or no more than the cost of the overdraft to the financial institution. 

But Congress could do away with this and other Biden-era policies under the Congressional Review Act, which allows Congress to cancel rules passed within a specified time. Indeed, the chair of the House Financial Services Committee, Arkansas Republican French Hill, has introduced a draft joint resolution to eliminate the overdraft rule. The leader of the Senate Banking Committee, Tim Scott, R-South Carolina, objected to the rule when it was finalized in December.

Even if a rulemaking rollback happens at the federal level, that doesn’t mean states will sit by and do nothing. For instance, the New York Department of Financial Services came out with its own proposed rule last month to cap overdraft and nonsufficient fund fees for state-chartered financial institutions. Under the proposal, no institution could charge a fee if the overdraft is less than $20, and none could charge more than the amount of the overdraft, among other limitations.

Although many banks wouldn't be impacted by the New York state rule, it hints of a potential backlash from some states. “I wouldn’t be surprised to see blue states have their own regulation,” said Jonah Crane, a partner at Klaros Group, speaking at Bank Director’s Acquire or Be Acquired Conference in late January.  

If that happens, a new kaleidoscope of state-based regulation could appear.

• Naomi Snyder, editor-in-chief for Bank Director 

Banks Anticipate Smoother Sailing for Consolidation

Under the Biden administration, approval times for bank deals increased significantly. There are already signs that regulators are likely to reverse this trend during the second Trump term.

“It all starts at the top of the house, which was this attitude of, ‘I want all deals to be subjected to incredible scrutiny.’ … Now the attitude is, ‘We're trying to grow. We are trying to build the economy.’” — Bill Burgess, Piper Sandler & Co. 

• Jackie Stewart, executive editor for Bank director

Wanted in 2025: More New Banks

The new acting chair of the FDIC expressed a desire for more de novo formation as part of a broader effort to shift the agency’s stance toward M&A.

Regulators Scrutinize CECL Processes at Community Banks

In upcoming exams, regulators are looking for evidence that community banks have improved and refined their CECL processes.

Critical Questions Directors Should Ask During M&A Due Diligence

A successful bank M&A strategy requires a thorough due diligence process, and bank directors can play an important role by asking the right questions.

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