January 20, 2024 / VOLUME NO. 297

The CFPB Strikes Again

A yearslong effort by the nation’s banks to avoid tougher limits on overdraft fees appears to have failed. This week, the Consumer Financial Protection Bureau (CFPB) issued a notice of proposed rulemaking to cap fees for banks and credit unions with more than $10 billion in assets. Banks with assets of less than $10 billion would be exempt. 

The CFPB said overdraft fees are the source of billions in profits for the banking industry. An agency press release said the industry typically charges $35 per transaction and estimated the draft rule could save consumers $3.5 billion or more in fees per year.  

The CFPB said its proposal would overturn exemptions for overdraft fees that have existed under the Truth in Lending Act since at least 1969. It would give banks three options: treat overdrafts as extensions of credit, subject to the same disclosure rules that govern credit cards; charge a fee based on what overdrafts cost their institution or use the CFPB’s capped fee. Currently, the CFPB is considering a $3, $6, $7 or $14 cap per overdraft, based on its calculations of what overdrafts cost five institutions in the agency’s research.

Overdrafts have been a focus of regulator attention for over a decade. In 2009, the Federal Reserve prohibited banks from charging overdraft fees on debit card or ATM transactions unless the customer opted into those charges. Under pressure from the CFPB, many large banks have in recent years made overdraft programs more consumer-friendly by unilaterally slashing overdraft fees or eliminating nonsufficient funds fees, which are typically charged when a transaction is rejected for lack of funds. For example, two years ago, Bank of America Corp. reduced overdraft fees to $10 for most accounts. 

Nonetheless, the CFPB is moving forward with its own response. If the proposed rule is adopted, it would likely take effect in October 2025. It would add to the list of regulatory disincentives, such as caps on debit-card interchange fees, for banks thinking about crossing the $10 billion threshold. The agency is accepting comments on the proposal until April 1. 

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

Magazine Exclusive: The Art of Managing Your Regulator

Exams have gotten tougher, and prudential regulators are focusing intensely on bank funding, interest rate risk and liquidity management. This complimentary article from the first quarter issue of Bank Director magazine looks at how banks will need to respond as supervision becomes more intrusive. 

“In my experience, when regulators are burned or they’re embarrassed or they’re criticized — however you want to define it — their goal is to see that it doesn’t happen again.”

— Gary Bronstein, Kilpatrick Townsend & Stockton


• Jack Milligan, editor-at-large for Bank Director

How Creative Restructuring Can Help Drive M&A

More banks are looking to pair acquisitions with balance sheet changes as dealmaking accelerates in 2024.

Get Out of React Mode by Integrating Finance and Risk in These Key Areas

To navigate today’s ever-changing headwinds, growth-oriented banks can make opportunistic and strategic decisions by managing financial data and quantifying their risks in a unified way.

Stress Testing Executive Change-In-Control Agreements

Periodically stress testing your bank’s CIC agreements to identify red flags is fundamentally good governance.

Considerations for Building AI Confidence

Three key issues banks should consider before adopting AI tools.