CFPB Saves LGBTQ Consumers Millions in Final Rule on Overdraft Fees
Consumers across the U.S. who are burdened by abusive overdraft fee practices will receive some relief today after the Consumer Financial Protection Bureau (CFPB) announced its finalized rule, which will reduce the fees from $35 (on average) to $5. The change will save consumers across the country an estimated $5 billion each year.
LGBTQ people are much more likely to overdraft their bank accounts. In the Center for LGBTQ Economic Advancement & Research and Movement Advancement Project’s 2023 LEAF survey, LGBTQI+ people were nearly 3.5x more likely to say they had overdrafted their bank account in the previous year. One in four LGBTQI+ adults in the survey (24%) had incurred at least one overdraft fee (vs. 7% of non-LGBTQI+ adults)
“The CFPB’s rule will prevent big banks from charging those consumers who can least afford it hundreds of dollars a year in junk overdraft fees,” said Spencer Watson, Executive Director for the Center for LGBTQ Economic Advancement & Research. “Overdraft fees sap the financial vitality of poor and working-class people, and particularly blight marginalized communities, pushing people out of the banking system who need to be brought in. The Bureau’s overdraft rule will promote straightforward, affordable forms of coverage protection.”
The CFPB’s action to protect consumers provides clear rules of the road to ensure consistency and clarity with overdraft products offered by the largest banks and financial institutions.
The new rule could face the threat of being overturned by Congress using the Congressional Review Act (CRA), however, which allows Congress, with the President’s approval, to overturn rules using expedited procedures and a simple majority vote and limited debate.
Congress must protect this rule from industry actors. If big banks were to have their way, consumers would lose the protections they need to support their day-to-day finances.
