CFPB Issues Overdraft Proposed Rule

On January 17th, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would dramatically change how very large financial institutions handle their overdraft programs. For purposes of the rule, a very large financial institution is one with assets of $10 billion or more.

Under the proposal, very large financial institutions would have two options for offering overdraft services:

• Courtesy Service with Breakeven Fees
• To maintain the payment of overdrafts as a courtesy service, the financial institution would have to limit its fees to a breakeven threshold. This threshold could be determined one of two ways. First, the institution can calculate its own threshold taking into account its overdraft losses and any direct costs associated with the payment of overdrafts. Alternatively, the institution could use a benchmark fee yet to be determined. Under the rule, the CFPB is proposing benchmark fees of $3, $6, $7, or $14.
• Overdraft Line of Credit
• The institution could instead choose to offer an overdraft line of credit. These lines would be subject to the disclosure and ability to repay requirements found in Regulation Z and consumers could not be required to set up automatic payment to repay their outstanding balance.

These requirements would go into effect the initial October 1st that is at least six months following the final rule's publication in the Federal Register. The CFPB anticipates this date would be October 1, 2025. Comments are due on or before April 1st. You can access a copy of the proposed rule here.