this post was submitted on 30 Dec 2024
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The Biden Administration is ‘cracking down’ on banks by imposing a $5 cap on overdraft fees, calling them ‘junk fees’ (finance.yahoo.com)
submitted 5 days ago by MicroWave to c/economics
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Summary

The Biden Administration, through the Consumer Financial Protection Bureau (CFPB), is capping overdraft fees at $5, down from $35, starting Oct. 1, 2025.

The move, targeting “junk fees,” could save U.S. consumers $5 billion annually.

The CFPB suggests banks adopt cost-based fees or offer overdraft credit lines while disclosing interest rates.

Industry groups oppose the rule, and its future is uncertain under a Republican-controlled Congress and the incoming Trump administration.

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[–] [email protected] 11 points 5 days ago (1 children)

If the fee is zero, the bank will just stop giving people over deaft which is how it should work anyway.

Only time I over drafted is because of a mistake.

But people also use overdraft as payday loan and these fees target them. So bank will need some fee to enable these "loans"

[–] [email protected] 4 points 5 days ago (1 children)

Why do we need to prevent payday loans in this manner? seems like the best way to have them. just put an upper bound and a interest rate on negative balances over a month old. you know... just like how a credit card works.

[–] [email protected] 5 points 5 days ago (1 children)

Because banks don't want this viewed as payday loans and the regulations it would attract.

They are punishing bad behavior is better justification for the extraction operation.

[–] [email protected] 3 points 5 days ago* (last edited 5 days ago) (2 children)

what are credit cards if not payday loans. and you didnt touch on anything relevant to my point. no one should gives a shit what banks think. its about whats good for the community.

you were asserting that the fees are to prevent people from using them as pay day loans. but banks already have that system its a credit card. why not just have over drafts tie into the credit card system and avoid this whole set of nonsense.

[–] errer 4 points 5 days ago (1 children)

Credit cards have zero interest if I pay off the balance in full each month. That is not an option for payday loans.

[–] [email protected] 1 points 5 days ago* (last edited 5 days ago)

Yes, thats why low limit credit cards are a better model than payday loans and was my point for both payday loans and overdraft fees.

[–] [email protected] 1 points 5 days ago (1 children)

People who need pay day loans can't get from credit cards... That's kinda the entire business model here

[–] [email protected] 0 points 5 days ago* (last edited 5 days ago) (1 children)

yes, I'm not talking about how it currently works. I'm giving you a thought experiment to reason through. things you should be asking yourself:

  1. what are the purpose of credit cards? what are the purpose of pay day loans?
  2. why do we restrict people from having credit cards? what purpose does it serve?
  3. why is having high interest rate payday loans for the people we prevent from having low limit credit cards in any universe a reasonable or justifiable concept.
  4. overdraft fees in no way help anyone, not even the banks it just makes them adversarial.

I'm asserting that a low limit credit card is functionality better for everyone than allowing predatory pay day loan services or overdraft fees to exist. both models fundamentally work the same way you spend money that isnt yours and pay it back later at an exorbitant fee if longer than X.

[–] [email protected] 1 points 5 days ago

Banks refuse to providing credits to poor people who need pay day loan. This is the current market condition