Trades Oppose CFPB OD Final Rule, Calling It ‘Misguided,’ Saying CFPB Overstepped Authority (CUToday, December 12, 2024)

​WASHINGTON—Banking and credit union trade groups are speaking out against the CFPB’s final overdraft rule, which caps overdraft program fees at $5 and applies to financial institutions, including credit unions, above $10 billion in assets.

Trades are saying the CFPB has overstepped its authority with the rule, which goes into effect in October of 2025, putting financial institutions in an “impossible” situation, calling the reg “misguided.”
“We believe the CFPB has exceeded its authority under the law and are prepared to fight to prevent this rulemaking from taking effect. The Bureau's ongoing abuse of power cannot be tolerated any longer. We urge Congress, and we will work with the Trump administration, to pursue reforms to the CFPB that are long overdue,” said America’s Credit Unions President/CEO Jim Nussle.
Nussle’s statement follows a CUToday.info report that suggested ACU may back eliminating the CFPB.
“With this final rule on overdraft protection programs, the CFPB is effectively telling consumers that their financial needs don’t matter if they don't fit the bureau’s political agenda and is seriously harming consumers who struggle with financial security,” Nussle said. “As we’ve repeatedly shared with the Bureau and Director Chopra, credit unions offer overdraft programs because their members need this option to make ends meet. Credit unions work with their members to overcome financial challenges, but this final rulemaking will make financial services either less available or more expensive – for everyone across the country. 
“As a result of the rule, credit unions will be put in an impossible position,” continued Nussle. “Some may no longer be able to offer an overdraft program because they lack the resources required to undertake the immense operational burden imposed by the rule or cannot afford to run their programs at a loss. This will only hurt and further disadvantage consumers.”
DCUC’s Stance
Defense Credit Union Council Chief Advocacy Officer Jason Stverak said the rule will hurt financial institutions and consumers.
“This is regulatory overreach and will only weaken financial institutions who cannot cover the costs of overdraft,” Stverak told CUToday.info. “In fact, all this proposal will do in the long run is encourage more people to overdraft their accounts. We urge the CFPB to reconsider this rule and encourage the incoming administration repeal this rule on day one.”
Rule ‘Misguided,’ Says ABA
Rob Nichols, American Bankers Association president and CEO, said his organization is “deeply disappointed that the CFPB has chosen to finalize this misguided rule at a time when every other federal bank regulator has stopped issuing new regulations. By taking this action, the Bureau has once again chosen to prioritize demonizing highly regulated and transparent bank fees over its mission to help consumers. This rule, and the government price controls that accompany it, will make it significantly harder for banks to offer this valuable service to their customers, including those who have few other options to cover essential payments. In finalizing the rule, the CFPB is ignoring the strong majority of Americans who have indicated time and again in national surveys that they value and appreciate overdraft protection, and they don’t want it to go away.
“In addition to the consumer harm this rule will cause, it‘s yet another example of the CFPB’s willingness under Director Chopra to exceed its Congressionally mandated guardrails,” continued Nichols. “The Bureau has no legal authority to subject overdraft services offered by any financial institution to Regulation Z, much less implement a price cap on overdraft protection. We will closely review the final rule with our members and consider all options going forward. It should not be allowed to go into effect.”
DCUC Letters
DCUC responded Thursday  with letters sent to the House Financial Services Committee, the Senate Banking, Housing, and Urban Affairs Committee, and CFPB Director Rohit Chopra.
The letters, DCUC said, reiterate the trade group's significant concerns about the overregulation of overdraft fees, pushing consumers toward higher-cost alternatives, such as payday loans, and ultimately, encouraging counterproductive overdraft activity. “The imposition of a $5 cap on overdraft fees disregards the operational realities of financial institutions and the costs incurred in providing overdraft protection services. This policy not only jeopardizes the sustainability of these services but also shifts the financial burden back onto consumers in unintended ways," the letters state. DCUC added that the new rule invites “a perverse incentive for individuals to overdraft their accounts more frequently, undermining the financial responsibility that overdraft policies are designed to encourage,” and without any safety net allowing consumers to keep payments on time, the rule “risks more decline rates due to non-sufficient funds,” potentially resulting in higher penalties from non-bank entities such as landlords, utility companies, and municipalities. “Burdensome regulations like this eliminate valuable programs that have historically protected consumers and encouraged financial readiness responsibility,” said DCUC President/CEO Anthony Hernandez. “There are always unintended consequences when the government oversteps, and I fear this will ultimately harm consumers in the long run.”