Another ill-considered rule written by the Consumer Financial Protection Bureau (CFPB) is going to be deep-sixed after the Senate voted 52-48 to repeal a rule limiting overdraft fees by banks. The resolution under the Congressional Review Act (CRA) now moves to the House, where it's expected to pass easily.
“President Biden’s politically motivated ‘junk fee’ conversation was not about helping consumers,” Senate Banking Chair Tim Scott (R-S.C.) said from the floor of the Senate.
“It was about trying to change the conversation away from the devastation that inflation was bringing to kitchen table after kitchen table after kitchen table all across America,” Scott added. “Overturning the Biden CFPB’s overdraft fee structure is good for consumers.”
The CFPB rule would have reduced the fee from an average of $35 to $5 or required banks to disclose an overdraft loan's terms.
Banking advocates have argued that the rule was typical Biden government overreach and could threaten other overdraft services like loans. Banks would be far stricter in offering overdraft loans if the fee were capped.
“This overdraft conversation is a critically important conversation if you are like me, a guy who grew up in poverty, a single-parent household, who understands the difficulty, the challenge, of single moms making those ends meet,” Scott said on the Senate floor. “I want every single hardworking American to have access to our financial system.”
The House will be an even easier sell on nixing the regulation, as some Democrats are likely to join Republicans in ending the rule.
House Financial Services Chairman French Hill (R-Ark.) introduced the companion CRA resolution to overturn the rule.
“As I have consistently said, the CFPB needs guardrails on its enforcement and rulemaking powers, and this rule is another clear example of why,” Hill said. “The CFPB’s actions on overdraft is another form of government price controls that hurt consumers who deserve financial protections and greater choice.”
The CRA wouldn't have been necessary if the Biden administration had listened to Rep. Hill and Senator Scott, who sent a letter to Biden in late December imploring him and his regulators to "put down your pens" and forgo the spate of "Midnight Rulemaking" that was about to inundate the American people.
The worst offender of "Midnight Rulemaking" was CFPB Director Rohit Chopra. The overdraft rule was only one part of Chopra's assault on common sense. He also issued a rule that would force credit reporting agencies to leave off medical debt from credit reports. This will "drive up costs to any American seeking medical care and have a devastating impact on consumers’ access to healthcare, particularly in rural areas," says Hill.
Hill and Scott have introduced a bill to allow the Congress to consider repealing several rules at once if they were part of a "Midnight Rule" avalanche such as the one Biden unleashed in the waning hours of his term.
“When you start capping this fee structure,” Sen. Scott said, “you start eliminating overdraft.”
Sen. Scott cited a Federal Reserve Bank of New York study that found such caps “hinder financial inclusion” because “banks reduce overdraft coverage and deposit supply.” The rule would cause banks to drop overdraft protection and raise other fees, including on checking accounts. Lower-income folks would lose access to the banking system and perhaps have to pay more to get payday loans.
Many banks have already slashed overdraft fees to compete with fintech firms. But Biden CFPB director Rohit Chopra didn’t care since his goal was to expand political control over banks while pretending to stand up for consumers. The real ones standing up for consumers are Senate Republicans—Mr. Hawley excepted.
Biden's "Midnight Rulemaking" was naked class warfare, misleading voters into thinking that Biden was "sticking it to the banks."
Instead, Biden was actually "sticking it" to the voters.
