CFPB Unveils Overdraft Fee Regulations for Large Banks and Credit Unions

Nearly a week after a federal judge blocked a cap on “junk fees,” the Consumer Financial Protection Bureau is overhauling overdraft fee regulations for large financial institutions.

The CFPB aims to close what it called an “outdated overdraft loophole” in lending laws, according to a Thursday (Dec. 12) press release. The new rule, set to take effect Oct. 1, 2025, applies to banks and credit unions with assets exceeding $10 billion.

Under the new regulations, affected institutions must choose one of three options for their overdraft programs: cap overdraft fees at $5; set fees to cover only costs and losses; or comply with standard lending laws, including interest rate disclosures, the release said.

These changes could save consumers up to $5 billion annually, or approximately $225 per household that incurs overdraft fees, per the release.

The rule addresses a longstanding exemption dating back to 1969 when the Federal Reserve Board excluded overdraft services from Truth in Lending Act protections, according to the release.

“The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they’re charging on overdraft loans,” CFPB Director Rohit Chopra said in the release.

In 2023, consumers paid over $5.8 billion in reported overdraft and non-sufficient fund fees, despite some banks already reducing or eliminating such charges, per the release.

The CFPB’s action is part of a broader government initiative to address junk fees across various sectors. Since the bureau’s focus on this issue, consumers have saved $6 billion annually in reduced or eliminated overdraft and non-sufficient fund fees, the release said.

The order is bound to be challenged in the courts. On Friday (Dec. 6), U.S. District Judge Mark Pittman upheld an order blocking a cap on credit card late fees. He declined to dissolve an injunction he issued in May to block the CFPB’s $8 limit on late fees. The limit — part of the White House’s largest war on junk fees — has been opposed by banking and business groups.

The CFPB had argued in court that the injunction rested entirely on an appeals court ruling that declared the regulator’s funding structure unconstitutional, a decision ultimately overturned by the U.S. Supreme Court.

However, Pittman agreed with groups like the U.S. Chamber of Commerce and the American Bankers Association, which challenged the fee cap and argued the regulation could still be blocked on other grounds.

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