Senator Schumer sounding alarm on proposal to remove overdraft fee protection for bankers
NEW YORK (WABC) -- A rule limiting the amount of overdraft fees that a bank can charge is on the chopping block in Washington, D.C. this week.
Consumer watchdogs say the rule could save 23 million households $5 billion a year in overdraft fees.
"Fees shrink income that hurts the Long Island economy plain and simple," New York Senator Charles Schumer said
Standing in a New Hyde Park strip mall, Schumer warned about what he called a "quiet plan" brewing in Congress, one that would remove consumer protection from overdraft fees put in place by the Biden administration. Those protections limit the amount banks can charge customers who don't have enough money in their accounts to cover debits.
"The head of the House Banking Committee and the Senate Banking Committee each together introduced legislation to get rid of the rule and go back to the bad old days when they charged $35 per overdraft and that mounted up," Schumer said.
Schumer claims the proposal, a joint resolution, seeks to roll back the Consumer Financial Protection Bureau rule put in place after the Biden administration declared a war on junk fees plaguing American consumers which capped overdraft fees at $5.
President Donald Trump and Elon Musk's Department of Government Efficiency want to winddown the CFPB regulation, aiming to fire all of the agency's 1,700 employees, and dismantle the agency built to protect consumers. Schumer says the Republican led Congress is removing the rule quietly and with little attention.
"We can't let this happen. It's going to start a flood of increased fees that are going to cost people much too much money," Schumer said.
The senator says the average family pays $225 a year in overdraft fees, which allows banks to amass more than $5 billion in fees annually.
The rule would apply to banks which have more than $10 billion in assets and include the nation's biggest financial institutions.
Some banks eliminated overdraft fees or changed them on their own already.
Other banks, which charge between $34 to 36 per overdraft transaction, have sued the CFPB, saying that 80% of consumers favor coverage over returning or declining payment.
According to the American Bankers Association, an elimination of the overdraft protection would be "an illegal and harmful overreach that threatens millions of Americans access to liquidity."
The banks also argue that overdraft fees support their ability to let customers pay for some transactions with negative balances, which can help people access necessities like food and utilities - just at a very high cost. If it passes, the House and Senate would have to vote to approve, and President Trump will have to sign it.
The final rule was supposed to go in effect in October. The vote on whether it lives or dies is set for this week.
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