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Leagues Submit Concerns on Proposed Overdraft Rule to CFPB

The California and Nevada Credit Union Leagues recently submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) regarding its proposed rule on overdraft services.

The bureau’s rule targets “very large” financial institutions with assets exceeding $10 billion, allowing them to offer courtesy overdraft services or overdraft lines of credit. However, this rule’s impact extends beyond large institutions, affecting smaller credit unions and consumers. Under the proposal, covered financial institutions can calculate costs for courtesy overdraft protection services using their own “breakeven standard,” or a CFPB-set “benchmark fee” ranging from $3 to $14.

However, the Leagues believe this proposal misses the mark and presents significant challenges. The Leagues believe the CFPB’s proposal is a solution in search of a problem, unfairly burdening larger credit unions and posing unintended consequences for smaller credit unions and credit union members. The proposed price cap on overdraft services could lead many credit unions to discontinue essential programs, limiting options during financial emergencies and exposing their members to risks.

Key concerns raised by the Leagues include competitive harm, consumer understanding and preference for overdraft protection, oversight of operational costs, implications with respect to the Truth in Lending Act (TILA), and potential impacts on access for low-to-moderate-income households.

The Leagues strongly advocate for the CFPB to withdraw its proposal immediately and seek a balanced approach that protects consumers’ access to financial services, while addressing any legitimate concerns in a fair and equitable manner.

Additionally, the federal policy battle over overdrafts is just starting. The Leagues have taken active steps in response to this proposed rule, including:

  • More than 7,000 emails sent through Connect for the Cause as of April 2, 2024.
  • 300 credit union advocates visiting Washington, D.C. in March during the 2024 Governmental Affairs Conference (GAC) to discuss the proposal’s impact.
  • Submitting a comment letter to the CFPB, and gathering signatures from more than 60 concerned credit unions.
  • Collaborating with legislators to question the CFPB’s authority on fee caps, with ongoing efforts to hold regulators accountable during hearings.

The rule is expected to be finalized in October 2025.

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