Today, the Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), and the Chairman of the Subcommittee on Financial Institutions and Monetary Policy, Andy Barr (KY-06), issued the following statement in response to the Consumer Financial Protection Bureau’s (CFPB) proposed rule regarding overdraft fees.
“The proposed rule issued today by the CFPB would undermine the Bureau’s consumer protection mission,” said the lawmakers. “The Biden Administration’s attempts to mandate one-size-fits-all consumer financial products and services diminish financial inclusion, limit consumer choice, stifle innovation, and ultimately raise the cost of banking for all consumers. This proposed rule will further reduce access to the short-term liquidity products that millions of Americans rely on to help make ends meet. We urge the CFPB to withdraw this misguided proposal that harms the very consumers the agency was created to protect.”
Background:
- Overdraft protection is a short-term liquidity product that can aid consumers in making ends meet when a deposit account balance is low, particularly for those consumers who are unable to qualify for traditional credit products.
- Overdraft services are linked to a checking or savings account to offer a bridge to cover a purchase or expense, delivering financial flexibility and the certainty of knowing important transactions, such as rent or utility payments, will not be declined.
- Consumers must proactively opt-in to use overdraft services and can discontinue these services at any time.
- In fact, a 2023 study from the Financial Health Network found consumers want overdraft services and the flexibility they provide.
- In the survey, 81 percent of frequent overdraft users indicated that they would have preferred to incur a fee rather than have their payment declined.
- In December 2021, Biden’s own Acting Comptroller of the Currency Hsu cautioned that “limiting overdrafts may limit the financial capacity for those who need it most.”
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