A limit on overdraft fees might not happen after all. The U.S. Senate voted Thursday to overturn a rule that would limit overdraft fees to $5. The rule applied to banks with at least $10 billion in assets.
The resolution was approved 52-48 in a nearly party-line vote. Republican Sen. Josh Hawley was the only member of his caucus to vote against it.
The overdraft protection regulation was published at the end of the Biden administration’s term and supported by the Consumer Financial Protection Bureau. Lawmakers in the Senate voted to reverse it before it could come into effect.
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Senate Banking Committee Chairman Tim Scott of South Carolina sponsored the resolution that would end the protection. A companion resolution has been introduced in the House of Representatives.
Scott had criticized the Biden administration for approving rules within the CFPB in the two months between the presidential election and inauguration day.
"It is paramount that President Trump can begin his administration on January 20th with a fresh slate to implement the economic agenda that the American people resoundingly voted for," Scott said in December.
Both resolutions to change overdraft fees are supported by the American Bankers Association. The American Bankers Association said the proposed changes would have forced many banks to eliminate overdraft protections, which it claims is a service consumers want.
"Without access to overdraft protection, many Americans would be driven to less-regulated and higher-risk nonbank lenders to cover unexpected or emergency expenses," said ABA President and CEO Rob Nichols.
The Americans for Financial Reform said it was disappointed by Thursday's vote.
“Today’s vote is a betrayal of families, service members, and working people who live paycheck to paycheck,” said Patrick Woodall, managing director for policy at Americans for Financial Reform. “Overdraft fees are nothing more than an attempt by big banks to pad their profits at the expense of consumers.”
Standard overdraft fees have generally been $35. The rules that the Biden administration attempted to put in place would give banks the option to charge a break-even fee or a benchmark fee ranging from $3 to $14. Another option would be for banks to treat overdraft loans like other forms of credit, where banks could charge interest.
The rule is scheduled to go into effect April 1 and be enforced October 1.
