1 week Ago By Rishabh Mishra
Overdraft issuers including American Credit Unions , Consumer Bankers Association , American Bankers Association , and the Mississippi Bankers Association, have jointly filed a lawsuit challenging the Consumer Financial Protection Bureau ‘s new decision. What Happened: The U.S.
watchdog agency for consumer finance decided to cap the overdraft fees which can add up to $5 billion in annual fee savings to the consumers, or $225 per household that pays overdraft fees. “For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans’ deposit accounts,” said CFPB Director Rohit Chopra . “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.
” However, banking and other lending institutions have opposed this move. According to Consumer Bankers Association president and CEO Lindsey Johnson , “The CFPB's rule on overdraft services harms Americans who need it most—including the 26 million Americans who don’t have access to credit and thus stand to lose the most if overdraft services are restricted.” The CBA includes JPMorgan Chase, Citi, TD Bank, BMO Bank, and Santander.
American Bankers Association’s president and CEO Rob Nichols said, “CFPB's final overdraft rule exceeds the Bureau's statutory authority, ignores thoughtful industry and stakeholder feedback, and will harm the very consumers the CFPB claims to protect.” “Financial hardships have serious consequences on families, and overdraft programs provide an affordable lifeline in these circumstances,” said America's Credit Unions president and CEO Jim Nussle . “The association is going to continue to fight through legal action to reverse this grave mistake from Director Chopra,” he added.
See Also: Microsoft Expects $800 Million Impairment Charge Due To GM’s Cruise Exit, Analyst Says It’s A ‘Step In The Right Direction’ For Automaker Why It Matters: According to CFPB’s new rules, lending institutions would have to choose one of the three options when charging for overdrafts. The first one is to cap their overdraft fee at $5 per instance, while the second option is to cap their fee at an amount that can cover costs and losses. The third option gives freedom to the institution to charge discretionary fees and disclose the terms of their overdraft loan just like other loans.
According to Chopra, “Consumers have paid an estimated $280 billion in overdraft fees over the past two decades, including roughly $9 billion in 2022.” Many consumers have been hit by multiple fees in a day, because some banks have processed payments to trigger more and more overdraft fees. https://t.
co/ItYPm1ZDnK Price Action: Several U.S. bank stocks took a hit on Thursday after the CFPB finalized the rule.
Stock Closing price on Dec. 12, 2024 Change Wells Fargo & Co. WFC $70.
80 -1.12% JPMorgan Chase & Co. JPM $241.
53 -0.82% Citigroup Inc. C $71.
43 -0.74% Goldman Sachs Group Inc. GS $591.
61 -0.16% Morgan Stanley MS $127.91 0.
25% According to Benzinga Pro data , the SPDR S&P Bank ETF KBE fell 1.1%, while the SPDR S&P Regional Banking ETF KRE declined 1.2%.
Regional banks were affected, too. Stock Closing price on Dec. 12, 2024 Change Flagstar Financial Inc.
FLG $11.05 -2.13% Citizens Financial Group Inc.
CFG $45.54 -1.49% Regions Financial Corp.
RF $25.05 -1.38% Huntington Bancshares Inc.
HBAN $17.17 -1.27% Read Next: SMCI Stock Receives Harshest Price Target Among 17 Tracked Analysts As JPMorgan Maintains Underweight Rating On Super Micro: ‘No Significant Movement Of Orders’ Photo courtesy: Shutterstock © 2024 Benzinga.
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