HUNTSVILLE, Ala. (WHNT) — The House of Representatives voted against a Biden-era regulation putting a ceiling on overdraft fees, sending the resolution to President Trump’s desk for a signature.
The Biden Administration finalized a rule from the Consumer Financial Protection Bureau (CFPB) to cap the fees at $5. The rule is set to go into effect October 1 of this year. If President Trump signs the resolution from Congress, it will not go into effect at all.
Bankrate reported that the average overdraft fee was $27.08 in 2024, an increase from previous years. CFPB added that banks made $5.8 billion off the fees in 2023.
But what exactly is an overdraft fee?
“An overdraft fee, very simply stated, is when a person writes a check or tries to do a debit card transaction for more than the money they have in their account, more than their balance,” Redstone Financial Credit Union General Counsel Michael Rodgers said. “And when that occurs, if that, if that charge is paid or if that check is paid, then it would result in an overdraft fee.
Those who voted against the regulation said that allowing banks and credit unions to decide their own fee amounts promotes the free market and encourages consumers to choose which financial institution best fits them.
“It’s kind of like going to the gas stations where you compare the gas prices along the corner, you know, and maybe you go to the least expensive one,” Rodgers said. “Well, same way here. It’s just market forces. So, they could be as high as they want to. Of course, those are moderated by competition.”
Dev Wakeley with Alabama Arise said doing away with the cap on overdraft fees could disproportionately affect lower-income families.
“They’re just facing severe economic stress,” Wakeley said. “So when you increase those fees on them, you can’t educate somebody out of not being able to to have enough money to, to pay for their necessities.”
Wakeley said that folks he knows are dealing with economic struggles across the board and that decisions like this one could impact anybody.
“Everybody’s going to hurt because of this,” Wakeley said. “And the people who hurt the most are the people who have the least financial resources, naturally.”
Rodgers said Redstone Financial Credit Union has several avenues a consumer can choose to go down in an effort to avoid the fees, from choosing an account without the possibility to overdraw to setting up text alerts if your account ever falls below a certain amount of money.
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