House Financial Services Committee Approves Resolution On Overdraft Fees

The House Financial Services Committee reported 11 bills and resolutions to Congress this week after the committee held its first full committee markup session of this Congress.

Among them was H.J. Res. 59, which disapproves of the Consumer Financial Protection Bureau’s (CFPB’s) rule on overdraft fees for financial institutions.

The resolution was sponsored by Rep. French Hill (R-AR), chairman of the House Financial Services Committee. It passed by a vote of 30 to 19.

“To show our commitment to defending the U.S. and its allies against China, this markup included several bipartisan measures championed by members of this Committee. These bills underscore the scope of the Committee’s jurisdiction and the unique ways our members contribute to our national security,” Hill said. “We also considered a CRA to nullify the CFPB’s harmful overdraft rule. By forcing banks to cut their fees, or to treat overdrafts as “loans”, banks will limit the service, especially to low-income and low-credit customers. That would drive customers in a pinch towards alternative products – much more costly non-bank products.”

The committee cited a recent study from the Federal Reserve Bank of New York on fee caps. The report said that while fee caps reduce overdraft fees, they also trigger adjustments by banks that limit the financial inclusion of low-income households. The report added that policies that promote increased competition and transparency may be more effective in keeping overdraft fees in line.

The resolution was supported by several financial industry groups, including the American Bankers Association (ABA) and 52 state bankers’ associations.

“If not invalidated, Director Chopra’s rule would lead banks to restrict, if not eliminate, access to overdraft, harming those consumers who have few, if any, other options for meeting short-term liquidity needs. The rule would do so even though analyses show that the average transaction that overdraws the customer’s account is in the hundreds of dollars. Not surprisingly, survey after survey show that consumers appreciate and value their institution’s overdraft program and are glad that their institution covered their overdraft payment, rather than returned or declined the payment,” ABA officials said in a statement.

Americas Credit Unions, the Consumer Bankers Association, and the Independent Community Bankers of America (ICBA) also backed the resolution.

“Ultimately, the CFPB’s rule would force many community banks to stop offering overdraft services to their customers, resulting in significantly more bounced checks and declined debit card transactions. The rule may not only reduce access to services but could create a chilling effect on financial inclusion efforts, and force unbanked and underbanked consumers to predatory options,” ICBA President & CEO Rebecca Romero Rainey said.