RIP Overdraft Rule?

Last month, bills were introduced in the House and Senate to overturn the much-maligned CFPB overdraft rule. You can find our previous write-up on the rule here. The rule would redefine “finance charge” under Regulation Z to sweep up overdraft fees charged by “Very Large Financial Institutions” (total assets exceeding $10 billion). Unless covered entities charged a “breakeven” fee (calculated through a head-spinning formula) or a “benchmark” fee ($5), they would have to treat overdraft fees as an extension of credit under the Truth in Lending Act (i.e., issue a bunch of onerous disclosures).

The rule was questioned when it came out in January 2024—an issue we previously addressed. Several banks ran to court as soon as the final rule was promulgated in December 2024. As we explained, the rule carried potentially drastic consequences that would create exposure beyond overdraft fees and beyond Very Large Financial Institutions.

When former CFPB Director Rohit Chopra unveiled this rule at the beginning of an election year, he probably didn’t anticipate a Republican sweep of Congress and the White House. But, given November’s results, yesterday’s outcome shouldn’t be a surprise: The Senate voted 52-48 to eliminate the overdraft rule pursuant to the Congressional Review Act (5 U.S.C. § 801). If the companion measure passes the House, the matter will go to President Trump’s desk for his signature. If both of those things happen, the overdraft rule cannot be resurrected again except by an act of Congress.

That’s what we expect to happen. But it’s not certain. Overdraft fees may draw the ire of populist elements within the Republican Party. Note that Sen. Josh Hawley broke rank to vote against the measure.

Stay tuned. We’ll keep track of this issue.