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• Overdraft fees can cost upwards of $40, which can be expensive when you're already low on cash.
• A new CFPB rule could cap overdraft fees to $5 for very large institutions starting next October.
• If you don't want to wait until then, there are steps you can take to avoid overdraft fees now.

Overdraft fees can be a huge financial burden when you're already struggling to make ends meet. The best banks for avoiding overdrafts don't charge overdraft fees at all, but it's more common for banks to charge overdraft fees in the $20 to $40 range.

The Consumer Financial Protection Bureau recently finalized a rule that would limit large financial institutions — institutions that have $10 billion or more in assets — from charging high overdraft fees. The rule is expected to take effect on October 1, 2025, but that might change if Congress decides to overturn it.

If you have a checking account with a large national bank or credit union, this rule could likely affect you. Here's what you can expect to change and what you should do to take advantage of lower overdraft fees.

Who would be affected by the CFPB overdraft final rule?

The CFPB only has authority over very large financial institutions, which it defines as those with more than $10 billion in total assets. According to the CFPB Depository Institutions list, which uses data from Q3 2024, a little under 180 banks and credit unions meet those criteria.

The most commonly used banks and credit unions, such as Bank of America, Wells Fargo, Ally Bank, and Navy Federal Credit Union, are on this list. A few of those financial institutions, like Ally, have already eliminated overdraft fees.

Financial institutions on the list that haven't eliminated overdraft fees have a couple of other options if they don't want to cap overdraft fees at $5. They can prove to the CFPB that they aren't making a profit on the overdraft fees they charge, which will likely be a more complicated process than just capping their fees. They could instead treat overdrafts like other consumer credit options, which include consumer loans and credit cards. Consumer credit options are more strictly regulated than overdrafts are now.

But if you use one of the CFPB's listed banks and it still charges overdraft fees, this rule would almost certainly lower what you pay for overdrafts — if it goes through.

"I would expect to see litigation from the banking industry, as well as the potential for political changes with a new administration or a new Congress starting in January," says Patrick O'Leary, CFP® professional, Sr. Vice President and financial advisor at O'Leary Wealth Management with D.A. Davidson and Co.

But even if the rule doesn't go through, it could still have an indirect impact on overdraft fees. "Even if it doesn't go into effect as it's written now, I think the continued pressure on banks, from both a regulatory perspective as well as from the public, is likely to push these fees lower in many instances," says O'Leary.

The CFPB estimates that the rule will save consumers $5.2 billion dollars each year. Low-income consumers are the ones who will save most if the rule is passed.

"The CFPB is trying to limit the impact and the cost to consumers, especially lower-income consumers," says O'Leary.

What you can do to take advantage of the new overdraft cap

If you find yourself overdrafting your checking account frequently, you might want to take advantage of this rule. To do that, just make sure your primary checking account is from one of the financial institutions listed on the CFPB website. Most of the banks that made our list of best banks are large enough to be covered by the CFPB.

If you don't want to wait until next October to lower your overdraft fees, we've provided a list of some of the best checking accounts for overdraft below. All of these accounts are overdraft fee-free, and some of them have other perks, such as being high-yield checking accounts.

How to mitigate overdraft fees now

While this rule would help you avoid high overdraft fees, there are ways you can lower the impact of overdraft fees on your budget regardless of whether the rule goes through.

If you find yourself facing surprise overdraft fees, calling your bank might help lower your costs. "Call your bank and speak to them. Let them know what has happened. A lot of times, they will waive some or all of those fees," says Angela Moore, CFP® professional, founder of Modern Money Education.

If you want to avoid overdrafts entirely, there are a few ways to accomplish that. "One thing you can do is you can call your bank and tell them that you do not want overdraft options on your account," says Moore. This will make it so any transactions that would take your account into the negative would automatically decline.

"Another option you could do is always keep a cushion in your account. If you typically spend $5,000 a month, maybe you keep an extra $2,000 in your checking account as a cushion," says Moore.

She also says that signing up for overdraft transfers, which lets you automatically transfer money from your savings to cover overdrafts, could help avoid heavy overdraft fees. Some banks charge fees for overdraft transfers, but they're generally lower than overdraft fees. Additionally, O'Leary says that the new CFPB rule also applies to overdraft transfer fees.

• The CFPB finalized a rule that allows banks to cap overdraft fees at $5 or set the fee at an amount that covers losses.
• The rule, which will take effect in October 2025, is projected to save Americans $5 billion annually, or $225 per household.
• The CFPB previously found that banks were charging Americans unnecessary overdraft fees.

Americans who spend more than they have in their bank accounts won't be burdened with hefty fees come October next year.

On Thursday, the Consumer Financial Protection Bureau announced that it finalized a rule that would limit overdraft fees at the bank. Overdraft fees are charged when customers make a withdrawal that results in a negative account balance. However, the CFPB found that some banks charged higher fees than they needed to cover their losses, leaving consumers in a financial bind.

The new rule updates federal regulations for banks with more than $10 billion in assets. It provides those banks with options for lowering overdraft fees, including capping them at $5. For banks that choose to offer overdraft as a service for their customers, the rule allows banks to set their fee at an amount that covers costs and losses. If banks do want to keep making profits off of overdraft fees, they'll have to disclose the terms of it like they do with credit cards and other loans.

These changes are expected to save Americans up to $5 billion each year, or $225 per household, the CFPB said.

"For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans' deposit accounts," CFPB Director Rohit Chopra said in a statement. "The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they're charging on overdraft loans."

Lower-earning Americans are disproportionately impacted by overdraft fees, per a previous report from the CFPB. The agency found that around a third of households with income below $65,000 were charged with an overdraft or a non-sufficient fee, compared to just 10% of consumers in households earning over $175,000. Americans of color and those without a college degree were also more likely to live in households affected by those fees.

The CFPB's finalization of the overdraft rule comes as the future of the agency is unclear. President-elect Donald Trump tapped Elon Musk and Vivek Ramaswamy to lead the new Department of Government Efficiency, or DOGE, which aims to get rid of government waste. The two DOGE leaders said they would accomplish that goal, in part, by eliminating some federal agencies, including the CFPB.

"Delete CFPB," Musk wrote in a late November post on X. "There are too many duplicative regulatory agencies."

Chopra responded to Musk's remarks during an MSNBC interview on December 7, saying that getting rid of the CFPB would be "mayhem" and "begging for a financial crisis."

"I don't understand why people would want financial crime," Chopra said, "and if they say it's duplicative, who else will do it?"

Have you paid overdraft fees or struggled with banking fees? Contact these reporters at [email protected] and [email protected].

• Sen. Elizabeth Warren led over 20 colleagues in requesting the CFPB and FTC investigate student-loan company Navient.
• They said they're concerned that Navient might be improperly denying defrauded borrowers debt relief.
• Navient said it's committed to getting relief to borrowers, but the discharge process is still in its early stages.

A group of Democratic lawmakers said that a major student-loan company is denying some student-loan borrowers relief that they might qualify for.

Sen. Elizabeth Warren led over 20 of her Democratic colleagues, including Rep. Alexandria Ocasio-Cortez and Sen. Ron Wyden, in sending a letter Wednesday to the Consumer Financial Protection Bureau and the Federal Trade Commission urging an investigation into the student-loan company Navient.

In the letter, viewed exclusively by Business Insider, the lawmakers wrote that Navient's process to cancel student loans for borrowers who said their schools defrauded them is "flawed, convoluted, and opaque," and it may have resulted in borrowers being "improperly" denied relief they qualified for.

A process known as the borrower defense to repayment allows borrowers with federal student loans to apply for debt cancellation if they believe their schools defrauded them. If approved, the government would wipe out their balances.

However, borrowers with private loans held by Navient cannot access the federal process. Instead, they can request a school misconduct application from Navient, and Navient would then decide whether to approve it.

The company previously said it's committed to addressing all "valid" misconduct claims.

The issue, the lawmakers wrote, is that Navient has denied relief for the majority of borrowers who applied. Navient wrote to Warren and her colleagues in a September letter, viewed by BI, that the company services about 65,000 borrowers who attended for-profit schools. As of September, Navient has sent 4,233 borrowers a school-misconduct discharge application, and 1,801 borrowers have submitted applications. Of the 1,061 applications Navient fully reviewed, 238 borrowers have been approved for relief, and 823 have been denied.

Navient wrote to the lawmakers that borrowers' applications are "carefully reviewed" by a legal team to determine eligibility for debt cancellation, and to date, it has approved over $8 million in relief. Still, the lawmakers said that the denials do not contain sufficient explanations, "leaving a fraction of Navient's borrowers who attended predatory, for-profit colleges with the relief that they deserve."

BI previously spoke to some borrowers who have attempted to navigate Navient's school misconduct application process. Nick Eucker, 38, said he received an application from Navient, and after submitting 200 pages worth of paperwork in support of his claim he was defrauded, Navient denied his application. The only reasoning he was provided was: "You do not meet the requirements for discharge based on misconduct by your school."

A Navient spokesperson previously said that the discharge process is still in its early stages, and the company expects more borrowers to see relief as it rolls out.

Still, the lawmakers said that Navient has the authority to cancel the loans of impacted borrowers without requiring a lengthy application process.

"Navient should cancel all of the private fraudulent debts for borrowers who have been harmed by its misconduct," they wrote, "all of whom the company is able to identify without an application."

• Elon Musk says he wants to eliminate the Consumer Financial Protection Bureau.
• The CFPB was created after the 2008 crisis to protect consumers from financial abuses.
• The CFPB has recouped billions for consumers but has long faced political and legal challenges.

In his efforts to cut government costs, Elon Musk has thrown his support behind slashing a federal office created in the wake of the Great Recession to regulate financial services used by Americans.

"Delete CFPB," Musk wrote on X early Wednesday of the Consumer Financial Protection Bureau. "There are too many duplicative regulatory agencies."

Musk, along with Vivek Ramaswamy, has been tasked with heading up the Trump-created Department of Government Efficiency, or DOGE, and finding ways to reduce spending and streamline bureaucracy within the federal government. The unofficial advisors have floated "deleting" entire agencies, laying off staff, and enforcing return-to-office mandates.

When reached for comment, a spokesperson for Trump's transition team said she had nothing to add to Musk's statement.

While it's unclear how DOGE and the incoming Trump Administration would abolish agencies, if it does, the CFPB could be on the chopping block. Here's a look at its purpose, employee makeup, and political controversies.

Why it was created

The CFPB was created by Congress as part of the 2010 Dodd-Frank Act. The law aimed to strengthen oversight of Wall Street after its risky mortgage lending practices caused the global financial crisis. The CFPB has a broad mandate to protect Americans from deceptive or abusive practices by US financial firms. The agency investigates consumer complaints related to credit cards, loans, bank accounts, and debt collection and enforces consumer protection laws.

Democratic Sen. Elizabeth Warren, a professor at Harvard Law School, originally proposed the agency in 2007. In 2010, President Barack Obama appointed Warren to head the CFPB's steering committee to help establish it.

"The time for hiding tricks and traps in the fine print is over," Warren said during a White House ceremony that year. "This new bureau is based on the simple idea that if the playing field is level and families can see what's going on, they will have better tools to make better choices."

How many people it employs

As of March 2024, the CFPB employed just under 1,700 people, earning an average of about $184,000 a year, according to the Office of Personnel Management. The Bureau's 2024 financial report broke that workforce into six groups; about 43% of CFPB's employees work in the supervision and enforcement of financial institutions, 18% in operations supporting the Bureau's other initiatives, and 14% in research, monitoring, and regulations.

What it has accomplished

Since its founding, the CFPB has recouped $19.6 billion for consumers through direct compensation, canceled debt, and reduced loan principals.

The agency has also issued $5 billion in civil penalties against banks, credit unions, debt collectors, payday lenders, for-profit colleges, and other financial services companies. That money is deposited into a victims' relief fund, with nearly 200 million people eligible for relief.

Some of CFPB's most high-profile enforcement actions have been against Bank of America and Wells Fargo. The agency in 2023 accused Bank of America of harming hundreds of thousands of customers by charging illegal fees, withholding credit card cash and reward points, and enrolling them in credit card accounts without their knowledge. Bank of America agreed to pay $250 million. In 2022, Wells Fargo agreed to pay $3.7 billion — a record sum — after a CFPB investigation alleged the bank mismanaged auto loans, mortgages, and deposit accounts, causing some customers to lose their vehicles and homes.

Last week, the agency finalized a rule expanding its oversight to big tech companies like Apple, Google, and Venmo, which offer digital wallets and payment apps and process some 13 billion transactions a year. Earlier this year, the CFPB also limited credit card late fees to $8 a month, compared to the average $32 fee charged by issuers in 2022.

Political controversy

Democrats designed the CFPB to have political independence by funding it through the Federal Reserve rather than While Democrats argue that the CFPB's independence is crucial to its efficacy, Republicans say the agency's funding source and governing structure make it unaccountable to the public and encourage regulatory overreach.

Since its founding, the CFPB has faced legal challenges from Republicans and the banking industry, who've taken issue with a slew of agency policies, including those regulating credit card late fees and those making it easier for consumers to switch between banks.

In May 2024, the Supreme Court rejected a constitutional challenge to the agency's funding structure, reversing a lower court decision in a 7-2 ruling. The high court's decision — authored by Justice Clarence Thomas, a conservative — has bolstered the agency but likely won't shield it from ongoing criticism and legal attacks.

Not everything the agency does has courted controversy. Recently, the agency won praise from Republicans for a new rule that would allow consumers to have more control over how their financial data is used by banks and other financial firms.