The Biden Administration is ‘cracking down’ on banks by imposing a $5 cap on overdraft fees, says Americans could save billions in ‘excessive junk fees.’ Will Trump kill the policy?

“The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they’re charging on overdraft loans,” CFPB Director Rohit Chopra said in the release.

Someone who uses overdraft more than 10 times per year can expect to pay $380 per year, the CFPB found in a report.

This stands to be a big win for everyday consumers, but there’s a chance the policy won’t survive the incoming Donald Trump White House and the Republican-controlled Congress.

Overview of overdraft

If your bank offers what is generally called “overdraft protection,” you can complete a purchase when you don’t have enough money in your account. You’ll just have to pay the associated fee and cover the shortfall.

Under the CFPB policy, banks could use other methods of addressing overdrafts. They could charge fees at what the agency calls a "break even" point — that is, only what’s required to cover the bank’s actual costs and losses, and no more.

Or banks could issue overdraft credit lines to consumers, provided they comply with existing laws governing lending, and disclose interest rates.

Some financial-services firms — such as Capital One, Citi Group and Ally — already forgo overdraft fees, while JP Morgan only charges fees for overdraft transactions above a $50 cushion and only after 24 hours of nonpayment.

WIll the GOP kill the new rule?

Industry groups have lobbied against the CFPB’s proposed new rules: The American Bankers Association and Consumer Bankers Association have publicly opposed the CFPB on the issue, even calling for Congress to step in with a repeal.

"Overdraft services are a vital lifeline for millions of consumers — including the one in five Americans who lack access to credit,” the Consumer Banking Association said in a statement.