On Dec. 12, 2024, the Consumer Financial Protection Bureau (CFPB) issued a final rule effectively capping overdraft fees at $5 for financial institutions over $10 billion in assets. The 296-page rule provides three options for large financial institutions who charge fees for overdrafts:

1. Cap overdraft fees at $5. According to the CFPB, $5 enables financial institutions to be able to cover their costs associated with administering a courtesy overdraft program.
2. Cap the fee at an amount just covering costs and losses, using a standard set forth in the rule. 
3. Treat the overdraft as a loan program and disclose as such. This entails giving consumers a choice on whether to open the line of overdraft credit, provide account-opening disclosures that would allow comparison shopping, send periodic statements and give consumers a choice of whether to pay automatically or manually.

It is thought most would comply with the rule by capping overdraft fees at $5. The rule is set to take effect Oct. 1, 2025. Financial institutions can expect immediate litigation challenging the rule. 

For more information regarding overdraft practices or for assistance to ensure you remain compliant, contact our regulatory compliance specialists today.