Banks Sue To Stop $5 Overdraft Fee Cap | Global News Avenue

As expected, the banking industry has filed a lawsuit to stop a new rule that caps most overdraft fees at $5.

The Community Bankers Association trade group joins other groups in suing Consumer Financial Protection Bureau (CFPB) seeks to overturn a bureau rule in federal court in Mississippi on Thursday finalized earlier in the day. The rule, which takes effect next October, will limit the fees large banks charge customers when they withdraw more than their account balance, typically around $30 to $35.

The bureau describes overdraft fees as “Garbage fee“Withdrawing funds from families living on the financial edge.” It points to research showing that most overdraft fees are charged to a small group of bank customers who repeatedly incur overdraft fees, typically those with lower incomes.

The banking industry believes that surveys show that customers like the safety net of being able to withdraw more money than they have in their account if other credit is not available.

“The CFPB’s rules on overdraft services hurt the Americans who need them most, including the 26 million Americans who lack access to credit, so if overdraft Services are limited,” CBA chief executive Lindsay Johnson said in a release.

Challenging the authority and existence of the CFPB

In the lawsuit, the group accuses the bureau of overstepping its authority in setting the rules. Bank regulators were established in the aftermath of the financial crisis great financial crisis.

The lawsuit is the latest flashpoint in a battle between financial services companies and bank regulators over so-called garbage fees under President Joe Biden’s administration. Court blocks another restrictive CFPB rule at least temporarily due to previous lawsuit Credit card late fees can be as high as $8.

With Republicans long hostile to the CFPB taking power in Washington in January, the future of the Biden administration in cutting fees and the bureau itself are in jeopardy. Trump adviser and billionaire Elon Musk earlier this year called for the bureau to be “removed”, calling it redundant.