Overdraft Fees Could Drop to as Low as $3 Under New Biden Proposal

[The Deadman]

https://www.usnews.com/news/business...biden-proposal

NEW YORK (AP) — The cost to overdraw a bank account could drop to as little as $3 under a proposal announced by the White House, the latest effort by the Biden administration to combat fees it says pose an unnecessary burden on American consumers, particularly those living paycheck to paycheck.

The proposed change by the Consumer Financial Protection Bureau would potentially eliminate billions of dollars in fee revenue for the nation’s biggest banks, which were gearing up for a battle even before Wednesday's announcement. Exactly how much revenue depends on which version of the new regulation is adopted.

Banks charge a customer an overdraft fee if their bank account balance falls below zero. Overdraft started as a courtesy offered to some customers when paper checks used to take days to clear, but proliferated thanks to the growing popularity of debit cards. So, for instance, a $10 debit card transaction could cost a bank customer $40 if their balance goes below zero.

“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," President Joe Biden said in a statement. "Banks call it a service — I call it exploitation.”

Under the proposed rule, banks could only charge customers what it would cost them to break even on providing overdraft services. This would require banks to show the CFPB the costs of running their overdraft services, a task few banks would want to handle.

[Andrew NDB]

While I do believe in consumer responsibility I'm not against this. I remember in my 20s getting ravaged by back-to-back $35 overdraft fees that would just stack and compound. It's a huge racket that only benefits the banks. Plus it's stupid... if retailers are running your card and putting in an amount and it's going to your bank, your bank knows what's supposed to come out of it on a given day, barring transactions involving tips during the same day that haven't been closed out yet. Why wouldn't it just decline?

[IndigoErth]

Exactly. If credit cards can be declined and prepaid Visa (etc) cards are limited to the funds that exist on them... no reason limited funds in the bank shouldn't trigger it to be declined, too.

They do this crap and profit off of people who don't have much to their name anyhow. (And then have the nerve to also make the interest on regular savings accounts barely anything now despite the fact that they use that money.)

[Mayhem]

It IS one aspect that's horribly biased against the consumer. Likewise charging to withdraw money from ATMs. All the major banks here have low overdraft fees and no fee to withdraw money from any of their machines. Yes that does mean they make their money elsewhere, but those are situations likely to be faced by far less people overall.