The Consumer Financial Protection Bureau is proposing a rule on overdraft fees that would benefit New Yorkers. The rule closes a loophole exempting overdraft fees from provisions in the Truth in Lending Act.
Research shows New Yorkers paid almost $1.5 billion in overdraft fees during the early years of the pandemic.
Raquel Villagra, staff attorney with the New Economy Project predicts the program would have a big impact.
“The CFPB projected that this rule would keep an estimated $3.5 billion per year in people’s pockets. So, that’s $3.5 billion that banks would otherwise siphon through these high fees,” Villagra said.
Big banks oppose the rule, since it cuts into their profits. For now, the bureau is seeking comments from people about the rule, which is limited to financial institutions with assets equaling more than $10 billion.
Villagra said he’d like to see the rule be applied to all financial institutions, noting it could go further.
New York has taken steps to handle this issue. In 2022, the state Department of Financial Services developed a rule reducing or eliminating some of the fees banks can charge. Villagra noted beyond the CFPB and New York’s rule, signing the New York Public Banking Act into law would further help New Yorkers.
“It would enable cities and counties to divest that public money from these predatory and exploitative banks,” he added. “And it would enable cities and counties to create public banks that serve the public good, and that have a mission to address structural inequities.”
Moving to public banks could also benefit consumers, since analysis from the New Economy Project finds banks weren’t lending to people of color at the same rate they were lending to others.
The research shows big banks originated 25 cents in mortgage loans in neighborhoods of color for every dollar they lent in all other neighborhoods, even though New York City neighborhoods of color are about equal to all other neighborhoods.
Edwin is a reporter and producer in North Tonawanda, New York. He’s previously reported for the Niagara Gazette and the Ithaca Times. Edwin got an early start in radio interning for WBFO-88.7FM, NPR’s Buffalo affiliate. In 2018, he graduated from SUNY Buffalo State College with a B.A. in Journalism, and in 2022, graduated from Syracuse University with an M.S. in Communications.