The Biden administration has put forth a new proposal aimed at reducing overdraft fees charged by major banks in the United States. President Joe Biden emphasized the impact of these exorbitant fees on vulnerable Americans, stating that while banks label it as a service, he sees it as exploitation.
The proposed rule, introduced by the Consumer Financial Protection Bureau (CFPB), seeks to close a legal loophole that currently exempts overdraft lending services from consumer financial protection laws. The Truth in Lending Act is among the regulations that would now cover these services. The rule would apply to insured financial institutions with assets totaling more than $10 billion.
Under this proposal, large banks would have the option to provide overdraft loans if they adhere to existing lending laws, including mandatory disclosure of applicable interest rates. Alternatively, banks may choose to recoup their costs by charging a fee based on a set benchmark, such as $3, or by calculating their costs and charging accordingly.
This is not the first time that the Biden administration has addressed excessive and hidden fees. In a previous move, the Federal Trade Commission proposed comprehensive regulations to tackle these issues across various sectors, including travel, ticketing, banking, and other consumer services.
