On Wednesday, January 17, the Consumer Financial Protection Bureau (CFPB) released a proposed rule regarding overdraft fees for large financial institutions with more than $10 billion in assets. Under the proposal, large banks could still extend overdraft protection if they treat such a charge as a loan, including disclosing any applicable interest rate. Alternatively, banks could charge a fee to recoup their costs at an established benchmark – as low as $3, or at a cost they calculate, if they show their cost data.
Notably, this is the first time that the CFPB under Director Chopra has exercised its broad exemption authority in a material way or in a way that specifically recognizes relationship-based banking provided for by community banks. IBAT believes this is a significant precedent for ongoing advocacy efforts to exempt more community banks from other harmful regulatory overreach.
However, IBAT opposes price caps in any form, by any regulator, and believes the proposed rule will have unintended “trickle down” consequences despite the exemption for community banks with assets below $10 billion.
IBAT will provide a comment letter on the proposed rule and keep IBAT members informed of any regulatory developments regarding overdraft fees.
