Congress approves the reversal of the Consumer Financial Protection Bureau's overdraft regulation
Headline: Congressional Review Act Overturns CFPB's $5 Overdraft Fee Cap Rule
The Congressional Review Act (CRA) resolution to overturn the Consumer Financial Protection Bureau's (CFPB) rule capping overdraft fees at $5 was signed into law by President Trump in May 2025. This action effectively nullifies the CFPB's rule, which was controversial and faced opposition from some lawmakers.
The CFPB's rule, if not overturned, would have taken effect in October. The rule gave banks and credit unions with more than $10 billion in assets a choice regarding their overdraft fee policies. They could have chosen a blanket $5 charge per overdraft, set a fee that's equal to their costs and losses from offering overdraft protection, or continued charging overdraft fees at current rates with specific customer notifications.
The House voted 217-211 on Wednesday to overturn this rule. Interestingly, only one Republican, Rep. Ryan Mackenzie of Pennsylvania, voted against the CRA resolution in the House. Conversely, 23 Democratic attorneys general and the head of Hawaii's consumer-protection regulator wrote to lawmakers urging them not to support the CRA resolution.
The CFPB's rule was set to take effect in October, but following its repeal, the CFPB under Director Vought has withdrawn several enforcement actions related to overdraft fees. This includes lifting a $95 million refund order against Navy Federal Credit Union regarding overdraft fees.
The rule's nullification means the CFPB cannot reinstate a substantially similar rule without new rulemaking processes. The U.S. District Court for the Northern District of Texas vacated the CFPB’s overdraft rule in April 2025, preceding the CRA resolution.
Despite losing this rule, the CFPB continues to issue regulations and oversee other consumer financial protections, but its enforcement focus has shifted under current leadership. The Consumer Federation of America is against the House action to overturn the CFPB's overdraft rule, arguing that overdraft fees are a tool banks use to drive profits.
The CFPB's rule was met with legal challenges from the Consumer Bankers Association, American Bankers Association, Mississippi Bankers Association, and America's Credit Unions, who sued the Consumer Financial Protection Bureau to block the overdraft rule. The AGs aimed to counter the argument that limiting overdraft fees would deprive consumers of options and choice.
The CFPB's overdraft rule window for overturning resets when a new congressional session starts if the rule was issued less than 60 days before the end of a session. This means that if a similar rule is proposed in the future, it may face a similar challenge.
- The overturning of the CFPB's overdraft fee cap rule through the Congressional Review Act (CRA) has significant implications for both the finance and business sectors, as banks and credit unions now have less regulation regarding overdraft fees.
- The repeal of the CFPB's overdraft fee rule has opened a possibility for future legal battles, as the rule's window for overturning resets when a new congressional session starts if the rule was issued less than 60 days before the end of a session, meaning a similar rule may face a similar challenge in the future.
