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Last month, Congress passed a resolution to overturn a controversial Consumer Financial Protection Bureau (CFPB) rule on overdraft fees and disclosures.

The rule, which was set to come into force in October 2025, would have capped overdraft fees at $5 for all financial institutions with more than $10bn in assets.

The aim, according to former CFPB director Rohit Chopra, was to prevent these institutions from charging “” to consumers for profit.

As noted by the CFPB, $5 was the level at which most banks were expected to cover the costs of administering “courtesy” overdraft programs.

In the alternative, if covered financial institutions wished to continue to turn a profit from overdraft fees, they would have been required to disclose the terms of overdraft loans to their customers.

This would have ensured that for-profit overdraft fees are subject to the same disclosure standards as other credit products under the Truth In Lending Act (TILA) and Regulation Z.

The  to overturn the rule was introduced to Congress in February by Senator Tim Scott (R-SC), chair of the Senate Banking Committee.

Having been passed by both chambers, each with only one Republican dissenting, it now heads to the White House to be signed by President Trump.

The bigger picture

Overdrafts have been a key point of contention in the wider debate around unfair debanking in the US.

Senator Elizabeth Warren (D-MA), ranking member of the Senate Banking Committee, has taken up the issue most forcefully in Congress, and has been a supporter of the CFPB rule since its inception.

According to Warren, the largest banks in the US have been “” consumers by charging “predatory” overdraft fees, sometimes in the range of hundreds of dollars per month for being “only a few dollars” overdrawn.

Despite bank profits from overdraft fees in the US declining significantly, they remain high, and failure to pay the fees continues to be a main driver of debanking.

In 2023, US banks  approximately $5.8bn in overdraft and insufficient funds fees, down from nearly $12bn in 2019.

In February, minority staff on the Senate Banking Committee published an  of debanking-related complaints received by the CFPB.

It found that, in the past three years, more than 8,000 consumers filed complaints with the CFPB against a financial institution for improperly closing a checking, savings or deposit account. 

During the same period, almost 4,000 consumers filed complaints for being “unable to open” a deposit account.

Given that only a “small fraction” of consumers file a complaint, the CFPB and minority staff believe that involuntary account closures may have affected “millions” of consumers.

In a  to President Trump, Senator Warren referenced a Harvard  that found that, between 2000 and 2005, approximately 30m accounts were closed due to “excessive overdrafting”.

Warren also noted that non-banks are emerging as a significant source of unfair account closure complaints, with complaint volumes on par with those of large regional banks.

Why should you care?

The demise of the CFPB overdraft fee rule will have significant implications for the financial services sector and for the wider debate around debanking in the US.

Politicians on both sides of the aisle say they are committed to ending unfair debanking, but unity on the issue breaks down when it comes to which measures ought to be implemented to achieve this, and which affected groups ought to be prioritised.

For Senator Scott and other Republicans, capping overdraft fees would have “hindered financial inclusion”, and would have dissuaded banks from offering overdrafts to those most in need, including low-income consumers.

But for Senator Warren and other Democrats, the “predatory” fees charged by banks are the reason that low-income consumers can become trapped in a cycle of overdraft use.

At present, Congressional Republicans appear to be more invested in preventing other forms of debanking — of crypto firms, political figures and conservative-aligned individuals and businesses.

Last month, for example, the Senate Banking Committee passed another bill from Senator Scott to eliminate the use of “reputational risk” in federal banking supervision.

Like other Republican-led debanking initiatives, that bill can also be expected to succeed.

But although reputational risk may soon be axed as a regulatory concept, it will live on in the court of public opinion.

This is where the reversal of the overdraft rule may backfire on the financial institutions that it would have covered.

A return to the status quo will mean a return to high volumes of complaints, loss of customer and stakeholder trust, and continued attention on the issue from Democrats in Congress.

In short, the US debanking battle is far from over, and overdrafts and their associated fees will likely continue to play a significant role in it.