AG Ford, in a letter, urges the U.S. House to reject a resolution that aims to protect consumers from excessive overdraft fees.
Attorney General Aaron D. Ford of Nevada said today that he and 22 other attorneys general wrote to the House Financial Services Committee and the U.S. House of Representatives leadership, urging them to vote against a resolution that would overturn the Consumer Financial Protection Bureau's (CFPB) 2024 rule that limits overdraft fees charged by the nation's biggest banks.
Large banks are prohibited by the legislation from imposing exorbitant overdraft fees, which can harm the customer's credit and occasionally result in account closures.
A 2024 rule established by the CFPB that only applies to banks with assets over $10 billion would be overturned by House Joint Resolution 59.
When customers overdraw their accounts, these large banks are subject to fair overdraft costs, which are limited by the rule.
However, by a vote of 52-48 late last month, the Senate passed its version of the resolution reversing the CFPB's regulation, with Senate Democrats and Republican Senator Josh Hawley voting against it.
According to the Attorney General's Office, banks typically charge an overdraft fee of $35, which is much higher than the actual overdraft amount.
They say another significant source of profit for banks is overdraft fees, which generated over $5.8 billion in 2023.
According to AG Ford and the coalition's letter, banks must regard these fees as interest on a loan, which is what they say they are in effect if they intend to keep making money off of them under the CFPB's rule.
A typical fee of $35 on an average overdraft of $26 is equal to an annual interest rate of 16,000%, since most overdraft fees are repaid in less than three days.
In the letter, AG Ford and the coalition make the case that the CFPB's rule is helpful in shielding bank customers from disproportionate and frequently unanticipated fees that may result in account closures that are not voluntary, harming their credit, or even forcing them to leave the banking system entirely.
In addition, they say excessive overdraft costs are unnecessary.
Many banks, such as Citigroup, Capital One, and Ally Bank, have already done away with overdraft fees while still offering the ease of overdraft protection, as AG Ford and the coalition note in the letter.
Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia are among the attorneys general who joined AG Ford in sending this letter. The alliance also included the Hawaii Office of Consumer Protection.
