Bank Overdraft Fees Could Soon Drop Significantly

Consumer watchdog agency eyes dropping some overdraft fees to as low as $3, closing a loophole that it calls a 'massive junk fee harvesting machine.'

Cartoon man in having money fly put of his pockets to a large U shaped magnet in someone's hand
(Image credit: Getty Images)

The Consumer Financial Protection Bureau (CFPB) has announced a plan to curb bank overdraft fees, which it says cost American consumers billions of dollars annually. 

Under the proposal, some overdraft fees could drop to as low as $3.

“The proposed rule would allow financial institutions to charge a fee in line with their costs or in accordance with an established benchmark,” the consumer watchdog agency said. The CFPB has proposed benchmarks of $3, $6, $7 or $14 and is seeking public comment on the amount.

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Overdraft fees from major financial institutions can reach as high as $35. Thanks to a loophole in the 1968 Truth in Lending Act, which protects customers from unfair credit card practices, overdraft loans were exempt from providing disclosures to customers whose accounts were overdrawn, the CFPB said. This was during a time when people used paper checks and overdraft was less ubiquitous.

"Today, we are proposing rules to close a longstanding loophole that allowed many large banks to transform overdraft into a massive junk fee harvesting machine," CFPB Director Rohit Chopra said.

The CFPB hopes to eradicate the outdated loophole, which it says provides massive profits to the banks at the expense of customers. The news comes after a December 2023 CFPB report finding that most Americans are still surprised by overdraft fees.

President Biden, who has made eliminating junk fees a tentpole of his presidency, said in a January 17 statement that the rule will do more to help Americans deal with their finances.

“For too long, some banks have charged exorbitant overdraft fees — sometimes $30 or more — that often hit the most vulnerable Americans the hardest, all while banks pad their bottom lines. Banks call it a service — I call it exploitation," he said. "Today’s proposal would cut the average overdraft fee by more than half, saving the typical American family that pays these fees $150 a year.”

CFPB has worked to lessen the blow of overdraft fees before. In December 2023, it ordered Atlantic Union Bank to refund consumers $5 million in illegal overdraft fees. In 2022, banks including Wells Fargo, Bank of America and Capital One eliminated overdraft fees. The CFPB has also worked to slash credit card late fees.

Convenience over profit

Under the proposal, large financial institutions, including the nation's 175 largest depository institutions, would be required to treat overdraft loans like credit cards and other loans, meaning they will need to provide clear disclosures about what’s involved with customers.

The CFPB said it wants to get overdraft fees back to the place they were during the checks era — a matter of convenience, not profit.

You can submit comments

Comments on the proposal are due by April 1. You can submit them at the Federal eRulemaking Portal by following the prompts for submitting comments.

You can also send an email to: and include Docket No. CFPB-2024-0002 or RIN 3170-AA42 in the subject line of the message.


Jamie Feldman

Jamie Feldman is a journalist, essayist and content creator. After building a byline as a lifestyle editor for HuffPost, her articles and editorials have since appeared in Cosmopolitan, Betches, Nylon, Bustle, Parade, and Well+Good. Her journey out of credit card debt, which she chronicles on TikTok, has amassed a loyal social media following. Her story has been featured in Fortune, Business Insider and on The Today Show, NBC Nightly News, CBS News, and NPR. She is currently producing a podcast on the same topic and living in Brooklyn, New York.