Fintech Nexus E-newsletter (January 17, 2024): CFB unveils rule proposal focusing on overdraft charges

The long-awaited new overdrafts rule from the CFPB was unveiled as we speak.

Since Rohit Chopra took over as head of the CFPB in 2021, they’ve made it clear that they had been going after overdraft charges and this proposed rule is the end result of these efforts.

The proposed rule provides banks two choices on methods to strategy overdrafts. First, banks might provide overdraft loans, treating them as a line of credit score, topic to all the foundations within the Fact in Lending Act. Second, they might provide overdrafts as a courtesy service with charges in alignment with their prices, within the vary of $3 to $14.

The brand new guidelines would solely apply to banks with $10 billion in property or extra and will not be anticipated to enter impact till October 2025.

Business teams will, in fact, combat these new guidelines. However many banks have seen the writing on the wall and have already eradicated or decreased overdraft charges.

I’ve written manyinstances about overdraft charges because it is among the most punitive of all banking merchandise with the charge usually exceeding the quantity of the overdraft. 

Fintech has taken the lead right here with many corporations providing overdraft options. In reality, I credit score fintech for beginning this whole motion for the unconventional change to the overdraft panorama.

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  • Peter Renton

    Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media firm targeted on fintech. Peter has been writing about fintech since 2010 and he’s the writer and creator of the Fintech One-on-One Podcast, the primary and longest-running fintech interview sequence.

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