On Thursday, the U.S. Senate voted 52-48 to overturn a Consumer Financial Protection Bureau (CFPB) rule that limited bank overdraft fees to $5. The action repeals a rule that was finalized in December 2024 and was designed to shield consumers from high fees charged when an account is overdrafted.
The CFPB regulation was one of the Biden administration’s wider efforts to phase out “junk fees”—surprise or overpriced charges that consumers usually find in financial transactions. The rule directly aimed at large financial institutions with assets over $10 billion, limiting them from charging more than $5 in overdraft fees unless they can justify higher fees for costs incurred in overdrawing accounts. The CFPB projected that the limit would conserve the 23 million families paying overdraft fees around $5 billion a year.
Senator Tim Scott (R-S.C.), Chairman of the Senate Banking, Housing, and Urban Affairs Committee, led the resolution to repeal the CFPB’s rule. He contended that the rule would result in decreased access to credit and necessary financial services for working Americans. “Reversing the Biden CFPB’s overdraft fee model is good for consumers,” Scott said in Senate floor comments.
On the other hand, consumer groups and some Democratic senators warned that removing the overdraft fee cap would unfairly harm financially vulnerable consumers. Senator Raphael Warnock (D-Ga.), the cap’s main advocate, pointed out that removing the cap would worsen the economic struggles of American families that are already facing economic uncertainty.
Senator Warnock expressed to The Atlanta Journal-Constitution that maintaining the $5 limit on overdraft charges would not negatively impact banks, stating they would continue to thrive. He emphasized that if the limit were repealed, families who are already facing financial strain would be further burdened.
The banking sector generally praised the Senate action. Rob Nichols, President and CEO of the American Bankers Association, argued that the CFPB’s regulation would have forced numerous banks to cap or discontinue overdraft protection services. “In finalizing the rule, the Bureau dismissed the views of most Americans, who have repeatedly expressed their appreciation for the service and believe it is reasonable for banks to charge a fee on overdrafts,” Nichols said.
The legislation now goes to the House of Representatives, where a companion bill filed by Rep. French Hill (R-Ark.) is pending consideration. Should the House approve the resolution and it is signed into law, the CFPB would be barred from promulgating a substantially identical rule in the future.
This congressional measure comes amid other attempts by the Trump administration to limit the reach of the CFPB. Acting Director Russell Vought ordered a work pause at the agency, which caused the halt of several enforcement proceedings against financial companies. These developments have left consumer advocates questioning whether the CFPB will still be effective at protecting consumers against abusive financial techniques in the future.
As the overdraft fee debate rages on, consumers are encouraged to stay watchful of their banking habits and seek out financial institutions that have more transparent and fair fee practices.
