New CFPB Overdraft Rule Raises Concern for Credit Unions

The CFPB has issued a final rule on overdraft practices for financial institutions with assets exceeding $10 billion. Set to take effect on October 1, 2025, the rule offers three options for managing overdrafts: capping overdraft fees at $5, limiting fees to the actual costs incurred by the lender, or treating overdrafts as a line of credit with disclosed interest rates.

Credit union leaders and organizations, including America's Credit Unions and the MD|DC Credit Union Association, have raised significant concerns about the rule's potential impact on consumers. They warn that these restrictions could reduce access to affordable overdraft services, pushing consumers toward higher-cost alternatives like payday loans. MD|DC Credit Union Association President and CEO John Bratsakis asserts that even credit unions not directly covered by the rule will face market pressure to align their practices with the new standards. The Association actively opposed the rule through a formal comment letter to the CFPB and during a roundtable discussion in March with CFPB Director Rohit Chopra.

The final rule is expected to face legal challenges and could be invalidated if the next Congress enacts a resolution under the Congressional Review Act.