The House has recently passed H. J. Res. 18, which seeks to overturn the CFPB’s overdraft rule, by a narrow margin of 217-211. With the Senate already approving this resolution, it now awaits President Trump's signature. Analysts predict he will endorse it. If enacted, the regulation would impose a $5 cap on overdraft fees at institutions exceeding $10 billion in assets unless they set their own cost-covering limits or classify overdrafts as loans under relevant laws. Financial trade groups have initiated legal action against this rule, originally slated for implementation on October 1, 2025. Acting OMB Director Russell Vought requested a pause in litigation proceedings, anticipating revisions.

House Republicans largely favor nullifying the rule, whereas Democrats support its retention. Chairman Rep. French Hill argues that the CFPB adopted a hurried and disorganized methodology, failing to account for various operational costs associated with overdraft programs. Conversely, ranking Democrat Rep. Maxine Waters contends that the rule does not eliminate overdraft fees but provides flexibility for larger banks to adjust charges based on actual expenses, while most small banks and credit unions remain unaffected.

Critical Perspectives Surrounding the Overdraft Rule

The debate over the CFPB's proposed overdraft rule highlights significant differences between political parties and financial stakeholders. The rule aims to limit overdraft fees to $5 unless specific conditions are met, such as covering real costs or treating overdrafts as loans with appropriate disclosures. Critics argue that this approach overlooks critical aspects like call center operations, consumer disputes, mailing costs, and regulatory compliance, making it unsustainable for many banks. Proponents, however, emphasize flexibility for large institutions to adjust fees according to their estimated costs and losses, suggesting that only a small percentage of financial entities would be directly impacted.

Chairman Rep. French Hill pointed out that the CFPB's decision-making process lacked thorough research and consideration of practical implications. He highlighted numerous overlooked expenses, including technology investments, third-party collection fees, and regulatory adherence. These additional burdens could discourage banks from continuing to offer overdraft protection services, potentially leading to their discontinuation. On the other hand, Rep. Maxine Waters noted that the rule allows larger banks to charge higher fees if they provide upfront disclosures to consumers, ensuring transparency. Furthermore, she mentioned that nearly all smaller financial institutions and credit unions are exempt from these regulations, minimizing widespread impact.

Partisan Divide on the Resolution

Political divisions within the House Financial Services Committee reflect broader disagreements about the rule's potential effects. Republicans generally advocate for repealing the regulation, arguing that it imposes undue restrictions on financial institutions' ability to manage overdraft programs effectively. They believe that limiting fees without accounting for actual costs undermines the sustainability of these services. Meanwhile, Democrats insist that the rule maintains necessary safeguards while granting flexibility to larger banks, ensuring fair treatment for consumers.

Rep. French Hill contended that the CFPB's rushed implementation strategy failed to consider the complexities involved in managing overdraft systems. He emphasized the importance of conducting meaningful research before imposing such regulations, pointing out the adverse consequences for both banks and consumers. In contrast, Rep. Maxine Waters defended the rule's provisions, asserting that it neither bans overdraft fees nor imposes rigid caps. Instead, it offers adaptability for major banks to align fee structures with genuine expenses, provided they communicate clearly with customers. Additionally, she highlighted the exemption status of smaller financial institutions, underscoring minimal disruption across the industry. This contrasting viewpoint underscores the ongoing struggle between regulatory oversight and business autonomy in shaping financial policies.