[House Report 119-26]
[From the U.S. Government Publishing Office]
119th Congress } { REPORT
HOUSE OF REPRESENTATIVES
1st Session } { 119-26
======================================================================
DISAPPROVING THE RULE SUBMITTED BY THE BUREAU OF CONSUMER FI-
NANCIAL PROTECTION RELATING TO OVERDRAFT LENDING: ``VERY
LARGE FINANCIAL
INSTITUTIONS''
_______
March 21, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.J. Res. 59]
The Committee on Financial Services, to whom was referred
the joint resolution (H.J. Res. 59) disapproving the rule
submitted by the Bureau of Consumer Financial Protection
relating to ``Overdraft Lending: Very Large Financial
Institutions'', having considered the same, reports favorably
thereon without amendment and recommends that the joint
resolution do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 4
Related Hearings................................................. 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 6
Performance Goals and Objectives................................. 6
Committee Cost Estimate.......................................... 6
New Budget Authority and CBO Cost Estimate....................... 6
Unfunded Mandates Statement...................................... 6
Earmark Statement................................................ 6
Federal Advisory Committee Act Statement......................... 6
Applicability to the Legislative Branch.......................... 7
Duplication of Federal Programs.................................. 7
Section-by-Section Analysis of the Legislation................... 7
Changes in Existing Law Made by the Bill, as Reported............ 7
Minority Views................................................... 8
PURPOSE AND SUMMARY
Introduced on February 13, 2025, by Representative French
Hill, H.J. Res. 59, a joint resolution providing for
congressional disapproval under chapter 8 of title 5, United
States Code, of the rule submitted by the Bureau of Consumer
Financial Protection relating to ``Overdraft Lending: Very
Large Financial Institutions'', would nullify the final rule
submitted by the Bureau of Consumer Financial Protection that
implements significant changes to federal regulations governing
overdraft fees for financial institutions with more than $10
billion in assets.
BACKGROUND AND NEED FOR LEGISLATION
Title X of the Dodd-Frank Act established the Consumer
Financial Protection Bureau (CFPB) for the purpose of
implementing and enforcing federal consumer financial law while
ensuring that consumers have access to consumer financial
services and products and that the markets that provide them
are ``fair, transparent, and competitive.'' Under the Dodd-
Frank Act, the CFPB can issue rules, examine certain financial
institutions, and enforce federal consumer protection laws and
regulations. Prior to Dodd-Frank, consumer protection laws were
enforced by an array of federal and state entities, including
the federal banking agencies.
Under Director Rohit Chopra, the CFPB repeatedly exceeded
its statutory authority, ignored decades of precedent,
circumvented the Administrative Procedure Act (APA), and pushed
the boundaries of its jurisdiction. This was made especially
clear when former Director Chopra finalized several rules
following the November 2024 presidential election. The CFPB's
overdraft rule is one of Chopra's midnight rulemakings aimed at
forcing financial institutions to be public utilities by
instituting a government price cap on a popular consumer
financial product.
The CFPB's overdraft rule, which applies to financial
institutions with more than $10 billion in assets, introduces
new requirements for offering overdraft products. Banks and
credit unions have two options: they (1) can provide overdraft
as a courtesy service or (2) treat it as a loan. If offering
overdraft as a courtesy service, institutions must choose
between (1) adhering to a $5 price cap set by the CFPB, which
is deemed sufficient to cover the costs associated with the
service, or (2) setting their own fee that only covers the
service's costs and losses, without factoring in risk,
deterrence, or profit. If overdraft is treated as a loan, the
service will be subject to the Truth in Lending Act (TILA) and
its Regulation Z, requiring more stringent disclosures and
compliance with loan-specific regulations.
The CFPB's overdraft rule is another form of government
price control that leads to fewer options for consumers. The
rule disregards the complexity of consumer behavior and
financial institutions' existing practices. By classifying
overdraft services as ``overdraft credit'' under Regulation Z,
the rule imposes burdensome disclosure requirements that may
confuse consumers rather than inform them. Financial
institutions have long relied on established guidelines to
manage overdraft services, which are designed to offer a safety
net for customers in financial distress. The reality is that
overdraft products allow millions of Americans each year to
meet their short-term financial needs rather than being denied
a purchase at the register.
The rule's one-size-fits-all approach fails to consider the
variety of overdraft practices across institutions and could
lead to unintended consequences, such as increasing the cost of
or eliminating overdraft protection programs altogether. This
may ultimately harm the very consumers the rule aims to protect
by limiting their access to financial flexibility and emergency
liquidity, especially for those who rely on overdraft services
as a temporary solution to cash flow issues. Emphasized in the
Federal Reserve Bank of New York report, ``Who Pays the Price?
Overdraft Fee Ceilings and the Unbanked,'' ``overdraft fee caps
hinder financial inclusion. When constrained by fee caps, banks
reduce overdraft coverage and deposit supply, causing more
returned checks and a decline in account ownership among low-
income households.''\1\
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\1\Fed. Reserve Bank of New York, Who Pays the Price? Overdraft Fee
Ceilings and the Unbanked (No. 973), (June 2021, revised July 2023).
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The CFPB's reinterpretation of credit in the overdraft rule
clearly disregards how Congress defined credit in TILA--as the
``right granted by a creditor to a debtor to defer payment of
debt or to incur debt and defer its payment.''\2\ When the
Federal Reserve implemented Regulation Z in 1969, it determined
that overdraft fees do not constitute credit. If financial
institutions are now required to treat overdraft fees as
credit, they will be forced to evaluate consumers' ability to
repay in a manner similar to how loans are underwritten, which
could impose additional burdens on both consumers and financial
institutions. This shift could complicate the management of
overdraft services and limit their accessibility for consumers
who rely on them as a temporary financial cushion.
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\2\15 USC Sec. 1602(f).
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When financial institutions are forced to provide overdraft
services without the ability to generate profit or under the
strict requirements of Regulation Z, they will be unable to
offer these services effectively. This could be detrimental to
consumers who rely on overdraft protection for everyday or
emergency purchases. Many of these households are financially
vulnerable, with low incomes and little to no savings, and may
lose access to their bank accounts--or the banking system
altogether. Such an outcome is counterproductive to the CFPB's
purpose and the broader goals of financial regulators to
promote fairness and financial access.
Moreover, the proposal overlooks the significant changes in
the banking sector regarding overdraft fees since 2020. Many
financial institutions have already reduced overdraft fees, and
several large banks have completely stopped charging overdraft
fees. These reductions have been accompanied by innovations in
banking, such as low balance alerts, mandatory back-up
accounts, and overdraft ``grace periods,'' which help consumers
avoid fees and better manage their finances. The proposed rule
fails to recognize these positive developments and the efforts
already being made to improve consumer outcomes.
Shortly after the rule was adopted, a preliminary
injunction was filed jointly by the Mississippi Bankers
Association, Consumer Bankers Association, American Bankers
Association, America's Credit Unions, Arvest Bank, Bank of
Franklin, and the Commercial Bank to prevent the CFPB from
implementing the rule. The lawsuit claims that the CFPB
violated the Administrative Procedure Act (APA) by exceeding
its statutory authority on three counts. Additionally, the suit
argues that the CFPB acted arbitrarily and capriciously by
failing to conduct a valid, statutorily required cost-benefit
analysis before implementing the rule.
COMMITTEE CONSIDERATION
119TH CONGRESS
On February 13, 2025, Representative French Hill (R-AR)
introduced H.J. Res. 59, Disapproving the rule submitted by the
Bureau of Consumer Financial Protection relating to ``Overdraft
Lending: Very Large Financial Institutions,'' with
Representatives Daniel Meuser (R-PA), Andrew Ogles (R-TN), Ann
Wagner (R-MO), Bill Huizenga (R-MI), William Timmons (R-SC),
Tim Moore (R-NC), Mike Haridopolos (R-FL), Andy Barr (R-KY),
Roger Williams (R-TX), Byron Donalds (R-FL), Maria Salazar (R-
FL), Troy Downing (R-MT), Ralph Norman (R-SC), and Glenn
Grothman (R-WI) as original cosponsors. Representatives Mike
Ezell (R-MS), Barry Loudermilk (R-GA), and Dusty Johnson (R-SD)
were subsequently added as cosponsors. The joint resolution was
referred solely to the Committee on Financial Services.
RELATED HEARINGS
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearing was used to
develop H.J. Res. 59:
The Full Committee held a hearing on February 5, 2025,
entitled ``Make Community Banking Great Again.'' A draft
version of H.J. Res. 59 was attached to the hearing. The
following witnesses testified: Mr. Pat Kennedy, Jr., founding
partner of the law firm Kennedy Sutherland, San Antonio, TX;
Ms. Susannah Marshall, Bank Commissioner of the Arkansas State
Bank Department; Ms. Cathy Owen, Executive Chairman of Eagle
Bank and Trust, Little Rock, AR; Ms. Rebeca Romero Rainey,
President and CEO of the Independent Community Bankers of
America; and Ms. Mitria Spotser, Vice President of Federal
Policy for the Center for Responsible Lending. In the course of
the witness testimony regarding overdraft fees, Ms. Romero
Rainey testified that the point of the concern about the rule
is that it limits options.
The Committee on Financial Services met in open session on
March 5, 2025, to consider H.J. Res. 59.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
On March 5, 2025, the Committee on Financial Services
ordered H.J. Res. 59 to be reported favorably to the House by a
recorded vote of 30 yeas to 19 nays, a quorum being present.
(Record Vote No. FC-019).
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.J. Res. 59 is to
rescind the CFPB's rule relating to ``Overdraft Lending: Very
Large Financial Institutions.''
COMMITTEE COST ESTIMATE
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.J. Res. 59.
The Committee has requested but not received a cost
estimate from the Director of the Congressional Budget Office.
However, pursuant to clause 3(d)(1) of rule XIII of the House
of Representatives, the Committee will adopt as its own the
cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974, and with
respect to the requirements of clause 3(c)(3) of rule XIII of
the Rules of the House of Representatives and section 402 of
the Congressional Budget Act of 1974, a cost estimate was not
made available to the Committee in time for the filing of this
report. The Chairman of the Committee shall cause such estimate
to be printed in the Congressional Record upon its receipt by
the Committee.
UNFUNDED MANDATES STATEMENT
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Committee will adopt the estimate once
it has been prepared by the Director.
EARMARK STATEMENT
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the resolution and states that the provisions
of the bill do not contain any congressional earmarks, limited
tax benefits, or limited tariff benefits within the meaning of
the rule.
FEDERAL ADVISORY COMMITTEE ACT STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO THE LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
The Joint Resolution disapproves of the rule submitted by
the Bureau of Consumer Financial Protection relating to
``Overdraft Lending: Very Large Financial Institutions'' and
asserts that such rules shall have no force or effect.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.J. Res. 59 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report required under clause 3(e) of rule XIII of
the House of Representatives.
MINORITY VIEWS
H.J. Res. 59 is a Congressional Review Act (CRA) resolution
that would rescind the Consumer Financial Protection Bureau
(CFPB) rule to reduce excessive overdraft fees charged by large
depository institutions with more than $10 billion in assets.
The rule requires banks to generally reduce overdraft fees to
$5 per transaction, though a bank could charge more if their
costs were higher, or they could disclose the product's
applicable interest rate to the consumer. The rule only applies
to the largest institutions with more than $10 billion in total
assets, leaving 97% of banks and nearly all credit unions
completely exempt. Moreover, this CRA resolution would not only
rescind the rule, but also prevent the CFPB from issuing any
similar rule on overdraft without a new law being enacted.
Overdraft is a service provided by a financial institution
when the money in a consumer account cannot cover a given
transaction, but a financial institution pays the transaction.
While some financial institutions do not offer overdraft
coverage on their checking accounts, banks that do typically
charge a fee for covering each overdraft, typically around
$35.\1\ Approximately 23 million households pay overdraft fees
every year, and CFPB's rule is estimated to save one-in-five
households a total of $5 billion each year. Surveys have shown
that more than 80 percent of Americans, including Republicans,
want to see these costly overdraft fees capped.\2\
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\1\Congressional Research Service, CFPB Finalizes Overdraft Rule,
Related Legislation (Feb. 24, 2025).
\2\See Americans for Financial Reform (AFR), New Poll Shows Voters
Across Party Lines Want CFPB Action to Curb Junk Fees, Tame Wall Street
(Sep. 9, 2024).
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In 1969, the Federal Reserve implemented a rule exempting
overdraft fees from being disclosed as finance charges to a
consumer pursuant to the Truth In Lending Act (TILA). This
exemption came at a time when banks charged overdraft fees on
rare occasions as a service to help prevent customers from
bouncing paper checks. As transactions became more automated
and electronic, consumer advocates argue the industry exploited
this TILA loophole to increase these fees and boost their
profits. Moreover, some banks sequenced how transactions were
applied to an account to maximize the number of overdraft fees
that could be charged.\3\
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\3\For example, see New York Times, Customers Can Lose When Banks
Shuffle Payments (Apr. 11, 2014).
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In response, Democrats introduced the Overdraft Protection
Act in 2009 to strengthen consumer protections and curb these
excessive practices.\4\ Among other things, the bill would have
prohibited the sequencing of transactions to maximize overdraft
fees and would have limited what banks could charge to an
amount that was reasonable and proportional to providing the
service. The bill was reintroduced in subsequent Congresses,
and the House Financial Services Committee later marked up and
approved the Overdraft Protection Act in 2022.\5\ Furthermore,
in recent years the House Financial Services Committee as well
as former CFPB Director Chopra highlighted the excessive
overdraft fees banks were charging, and the industry started to
voluntarily reduce some of these fees. CFPB estimated that
these voluntary reductions saved consumers roughly $6 billion
annually.\6\ Later, the CFPB proposed and finalized the
overdraft rule that H.J. Res. 59 would rescind that would save
consumers an additional $5 billion every year.
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\4\Former Rep. Carolyn Maloney (D-NY), Maloney, Frank introduce
Overdraft Protection Act in House (Oct. 22, 2009).
\5\House Financial Services Committee, Markup of Various Measures
(Jul. 27, 2022).
\6\CFPB, Overdraft/NSF Revenue in 2023 down more than 50% versus
pre-pandemic levels, saving consumers over $6 billion annually (Apr.
24, 2024).
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H.J. Res. 59 will effectively increase bank junk fees for
millions of consumers, including servicemembers and veterans.
CFPB's overdraft fee rule would benefit military families that
live paycheck to paycheck. Nearly 80% of military families used
checking accounts, and the CFPB's overdraft fees rule would
save roughly one-in-five households that pay overdraft fees
amounting to around $225 each year. These excessive overdraft
fees are harmful for junior enlisted service members who are
younger, less financially savvy, and struggling to make ends
meet. Servicemembers have filed CFPB complaints over unfair or
deceptive overdraft practices that have imposed unaffordable
fees. The CFPB previously took an enforcement action against
Navy Federal Credit Union for inappropriate overdraft fees,
requiring the credit union to repay $80 million to harmed
customers, largely servicemembers and veterans.\7\ Repealing
CFPB's rule will only expose servicemembers to excessive
overdraft fees when they can least afford them.
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\7\AFR, Fact Sheet: AFREF Factsheet on CFPB Overdraft Rule
Benefitting Servicemembers and Military Families (Feb. 19, 2025).
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Furthermore, H.J. Res. 59 will allow big banks to charge
excessive fees and encourage related exploitative practices.
Most debit card overdrafts are repaid within three days and are
used to cover transaction amounts that are less than $26, which
is less than the average overdraft fee that is charged.\8\
Banks have been found to have manipulated the order of
transactions to maximize fees or charged consumers overdraft
fees even when their account had sufficient funds.\9\ Curbing
excessive overdraft fees would discourage banks from engaging
in these manipulative practices, while allowing them to charge
a reasonable fee to provide this service to their customers.
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\8\National Consumer Law Center (NCLC), Fact Sheet: AFREF Coalition
Fact Sheet on CFPB Overdraft Rule (Jan. 21, 2025).
\9\Id.
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Moreover, this bill will undermine efforts to combat junk
fees that raise the cost of living. This overdraft rule was
part of an effort by the Biden Administration to combat junk
fees. In 2022, the CFPB launched an initiative to eliminate and
reduce junk fees, which are inflated, hidden, or back-end fees
that cut into consumers savings.\10\ For example, the CFPB
finalized a rule to limit certain late fees that credit card
companies could charge to $8 after it found that late fee
income exceeds associated collection costs by a factor of
five.\11\ The CFPB estimates that this rule would save
consumers up to $10 billion annually. The industry has sued the
agency to try to block that rule.\12\ Additionally, the CFPB
issued guidance in October 2023 to implement Section 1034(c) of
Dodd-Frank, which generally prohibits large banks and credit
unions from charging fees to provide basic account information
to a consumer when they request it.\13\ In late May 2024, the
CFPB initiated a public inquiry into the mortgage closing costs
related junk fees, reporting that median total loan costs for a
home mortgage increased by more than 36% from 2021 to 2023.\14\
The agency was searching for methods to reduce anticompetitive
fees that harm homebuyers and lenders.\15\ Unfortunately, the
industry and Congressional Republicans have fought back against
many of these efforts to enrich megabanks that already are
making record profits.\16\
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\10\See CFPB, Junk Fees (Accessed Nov. 21, 2023).
\11\CFPB, CFPB Bans Excessive Credit Card Late Fees, Lowers Typical
Fee from $32 to $8 (Mar. 5, 2024).
\12\See Ballard Spahr Consumer Finance Monitor, CFPB and plaintiffs
fully brief motion for preliminary injunction in trade group lawsuit
regarding final credit card late fee rule (Mar. 15, 2024).
\13\CFPB, CFPB Issues Guidance to Halt Large Banks from Charging
Illegal Junk Fees for Basic Customer Service (Oct. 11, 2023).
\14\CFPB, CFPB Launches Inquiry into Junk Fees in Mortgage Closing
Costs (May 30, 2024).
\15\Id.
\16\Bloomberg, JPMorgan Breaks Its Own Record for Best Year Ever
With 18% Jump (Jan. 15, 2025).
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At a time when working-class families are already
struggling with rising grocery prices, the cost of housing, and
the consequences of the disastrous economic policies of the
Trump Administration, H.J. Res. 59 would make life even harder
for the American people by giving big banks permission to
increase costs for consumers with excessively high overdraft
fees.
More than 200 consumer, civil rights, labor, legal
services, community organizations, and academics from across
the country oppose H.J. Res. 59, including: 20/20 Vision,
Accountable.US, American Association of People with
Disabilities, American Friends Service Committee, Americans for
Financial Reform (AFR), Blue Future, CAARMA, CAMEO Network,
Center for Economic Justice, Center for Justice & Democracy,
Center for LGBTQ Economic Advancement & Research (CLEAR),
Center for Responsible Lending (CRL), Center for Survivor
Agency and Justice, Coalition on Human Needs, Consumer Action,
Consumer Federation of America, Consumer Reports, Demand
Progress Education Fund, Disability Belongs, Disability Rights
Advocates, Equal Rights Advocates, Faith in Action National
Network, Family Values @ Work, HEAL (Health, Environment,
Agriculture, Labor) Food Alliance, Impact Fund, Interfaith
Center on Corporate Responsibility, Justice in Aging, National
Association for Latino Community Asset Builders (NALCAB),
National Association of Consumer Advocates, National Black
Justice Coalition, National Center for Law and Economic
Justice, National Coalition for Asian Pacific American
Community Development (National CAPACD), National Coalition for
the Homeless, National Community Reinvestment Coalition (NCRC),
National Consumer Law Center (on behalf of its low-income
clients), National Consumers League, National Disability
Institute, National Employment Law Project, National
Partnership for Women & Families, National Women's Law Center,
P Street, People Power United, Public Citizen, Public Good Law
Center, U.S. PIRG, and Woodstock Institute.\17\
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\17\NCLC, 201 Groups Oppose Repealing CFPB Overdraft Fee Rule (Feb.
5, 2025).
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For these reasons, we strongly oppose H.J. Res. 59.
Sincerely,
Maxine Waters,
Ranking Member.
Al Green,
Emanuel Cleaver, II,
Bill Foster,
Joyce Beatty,
Rashida Tlaib,
Sylvia R. Garcia,
Nikema Williams,
Cleo Fields,
Members of Congress.
[all]