CFPB confirms overdraft is here to stay

The Consumer Financial Protection Bureau (CFPB) has proposed a rule to be effective October 1, 2025 (at the earliest) that would regulate overdraft services at financial institutions with $10 billion or more in assets.

Our business (Velocity Solutions) provides overdraft workflow management software to hundreds of financial institutions. We and our clients overwhelmingly view the CFPB’s action as positive confirmation that overdraft is here to stay, contrary to the narrative some are promoting in the financial press.

The proposed rule substantiates that the CFPB understands the importance of the critical liquidity function that overdraft provides for the people who need it most. Many studies have shown that consumers want overdraft, and current rules require financial institutions to obtain consumers’ affirmative consent before they can charge consumers an overdraft fee on everyday debit card transactions. Furthermore, overdraft has consistently represented less than 0.2% of the total complaints the CFPB receives.*

Overdraft fees need to be separated from functionality – the functionality of providing liquidity to consumers that need it is critical, while there is an ongoing debate about the fees.

 

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