The Senate voted early on Thursday to overturn a rule that limited most bank overdraft fees to $5 — and was set to save Americans billions of dollars annually.
It was a nearly party-line vote, 52 to 48, with Sen. Josh Hawley of Missouri being the only Republican to oppose the measure. The resolution is now set to move on to the House. Arkansas Republican Rep. French Hill introduced a parallel resolution in February, The New York Times noted.
The rule, which was enacted by the Consumer Financial Protection Bureau last year, would have restricted the fees that banks and credit unions are able to charge when customers spend more than they have in their accounts. It’s usually $35 per overdraft. The CFPB estimated that it would have saved Americans roughly $5 billion a year. Banking trade groups were quick to challenge the rule in the courts.
The resolution was enacted via the 1996 legislation known as the Congressional Review Act, which allows lawmakers to retract recently adopted rules with a simple majority, and it can’t be filibustered.
The new rule on overdraft fees was set to take effect later this year. It was finalized in December following years of work on the issue. House Democrats are hoping to take advantage of the Republicans’ small majority in the House as they prepare to fight the resolution.
A lawsuit plaintiff, the American Bankers Association, celebrated the Senate’s action.
“If implemented, the C.F.P.B.’s 11th-hour rule imposing government price controls would force many banks to limit or eliminate overdraft protection as we know it,” chief executive Rob Nichols claimed, according to The Times.
“Many Americans would be driven to less regulated and higher risk non-bank lenders to cover unexpected or emergency expenses,” he added.
Meanwhile, consumer advocates argued that the removal of the rule would allow banks and credit unions to charge higher fees than what the service actually costs them.
Consumer Reports advocacy program director Chuck Bell said that, “Repealing the C.F.P.B.’s overdraft fee limits will hurt working families who are already struggling with high prices and inflation.”
On Wednesday, ahead of the vote, former Transportation Secretary Pete Buttigieg wrote on X: “Not getting much attention, but the Senate GOP is about to start voting — to make sure banks can charge higher overdraft fees. Seriously. Good time to let your Senators know what you think of that.”
Melanie D’Arrigo, the executive director of the Campaign for New York Health, added on Thursday afternoon on the social media platform that “Commercial banks donated $23,992,279 to elect Republicans last year. Today, Republicans voted to end the cap on overdraft fees. This is what corruption looks like.”
Democratic Ohio Rep. Shontel Brown wrote on X that “the Biden-Harris Administration placed a $5 cap on overdraft fees. Senate Republicans just voted to raise that cap back to $35. The bill comes over to the House next week. That’ll be a no for me.”
“Senate Republicans would rather you didn’t find out they just voted to give the biggest banks billions in profits from overdraft fees that kick working people when they’re down. Disgraceful,” said Massachusetts Democratic Senator Elizabeth Warren. “Meanwhile, every Senate Democrat voted against it.”
