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The Consumer Financial Protection Bureau (CFPB) announced today that new rules that go into effect in October 2025 will lower overdraft fees and reduce overdraft fees from banks where Americans have been paying billions of dollars in unnecessary fees each year for years. It was announced that the overdraft loophole would be eliminated and banks would also benefit.
This rule is intended to regulate overdraft programs; Overdraft fee A bank with at least $10 billion in assets, which includes approximately 175 assets. largest bank In the US. Overdraft credit facilities are also regulated. Regulation Z – Regulations that protect consumers from harmful or misleading lending practices.
According to the CFPB, as of the beginning of this year, approximately 23 million households paid overdraft fees each year. The CFPB expects its rules to save consumers up to $5 billion annually in fees. Potential savings of $225 per household paying overdraft fees.
Earlier this year, the CFPB estimated that large banks account for more than two-thirds of market-wide overdraft fee revenue. “For too long, big banks have exploited loopholes in the law to drain billions of dollars from Americans’ savings accounts,” CFPB Director Rohit Chopra said in a press release. “The CFPB is cracking down on these excessive junk fees and calling on major banks to come clean about the interest rates they charge on overdraft loans.”
CFPB rules limit some overdraft fees to $5
Bankrate’s 2024 Checking Account and ATM Fee Survey According to , the average overdraft fee this year was $27.08, but overdraft fees can reach as much as $38 per transaction. Under the new rules, that should decrease significantly.
The new rules mean that as of October 2025, the more than 175 banks and credit unions under CFPB oversight will still be able to offer overdraft services, but they will only be able to:
- Overdraft fees are less than $5.
- They charge fees to cover the costs and losses incurred in operating the overdraft program, but those fees do not make a profit for the bank.
- We provide overdraft financing (sometimes referred to as overdraft lines) as long as you comply with the requirements set forth for regulated loans, such as disclosing interest rates to consumers and allowing comparisons.
What are the changes to my overdraft limit?
Currently, the majority of overdraft loans are not subject to the Truth in Lending Act (TILA)/Regulation Z due to the 1968 forgiveness. The CFPB has closed this loophole and placed overdraft lines of credit under Regulation Z. , among other things, helps consumers understand the true costs of borrowing money through a line of credit.
4 ways to avoid overdraft fees now
The CFPB’s proposed rules are expected to go into effect in October 2025. Until then, here are four ways consumers can avoid costly overdraft fees.
- Find your bank No overdraft feesespecially if you think you may need to overdraft. Approximately 94% of accounts still incur overdraft fees, according to Bankrate’s 2024 Checking Account and ATM Fees Study, although some banks have lowered or eliminated overdraft fees in recent years. there is.
- Banks with financial institutions that provide early direct deposit. Getting paid a few days in advance can make the difference between having a negative account balance and having money available for future expenses.
- budget Plan your spending to avoid overdraft fees.
- Before using your debit card or making a payment to someone, check your balance using your bank app or bank website to check the balance in your bank account. Some banks also allow you to set up alerts that notify you when your bank balance is low.
conclusion
The CFPB’s latest rules lowering overdraft fees won’t go into effect until October 2025. Until then, your best bet to avoid these high fees is to find a bank with no overdraft fees and open an account with early direct deposit. Monitor your budget and account balances.
