Consumers who bank at community institutions and credit unions will keep paying overdraft fees as high as $35 per transaction after Congress killed the only federal rule that would have capped those charges. The repealed rule applied exclusively to banks and credit unions holding more than $10 billion in assets, leaving thousands of smaller institutions free to set their own overdraft prices with no new federal limit. The gap matters because the now-dead rule had projected annual consumer savings of roughly $5.2 billion, and none of that relief will reach customers of sub-threshold lenders.
How the $10 billion asset line splits overdraft relief
The Consumer Financial Protection Bureau finalized its overdraft rule in late 2024, publishing it in the Federal Register on December 30 of that year with a planned effective date of October 1, 2025. The rule created a benchmark fee framework for very large financial institutions, offering a $5 safe-harbor option alongside a cost-based alternative and a path that would have treated overdraft credit under Truth-in-Lending-style disclosure requirements. Only institutions exceeding $10 billion in assets fell within its scope.
Congress moved to block the rule through S.J.Res.18, a joint resolution of disapproval that passed both chambers and was signed into law as Public Law 119-10. In response, the CFPB updated its compliance guidance to state that the final overdraft rule now has “no force or effect,” while the remainder of Regulations E and Z remain unchanged. That last detail is the crux for smaller banks and credit unions: because the repealed rule never applied to them, and because no other federal overdraft cap exists, their fee schedules face zero new constraints.
The practical result is a two-tier system that was always embedded in the rule’s design but is now locked in place by the repeal. Large banks that had begun preparing for the $5 cap no longer need to comply. Smaller lenders never had to. Both groups can now charge whatever the market and state law allow, but only the largest institutions attracted the regulatory spotlight in the first place. Consumers at community institutions may therefore see little change even as political debate continues to focus on the biggest banks.
The $5.2 billion in savings that disappeared
The CFPB estimated that moving to a $5 benchmark fee at covered institutions would save consumers approximately $5.2 billion each year, according to a Government Accountability Office summary of the final rule. That figure applied only to customers of banks and credit unions above the $10 billion threshold. No comparable estimate was ever produced for the broader universe of community banks and credit unions, which collectively serve tens of millions of deposit accounts and often market themselves as lower-cost alternatives.
In announcing the now-repealed regulation, the bureau described its effort as closing an overdraft “loophole” that allowed banks to treat what is effectively short-term credit as a courtesy service, avoiding standard disclosures and cost limits. The CFPB’s news release framed overdraft programs as a major driver of fee revenue that falls disproportionately on frequent users, many of whom live paycheck to paycheck. By tying a $5 benchmark to large institutions, regulators aimed to cut into that revenue while preserving access to overdraft lines.
House Report 119-26, the committee report accompanying the companion resolution H.J.Res.59, recorded lawmakers’ argument that the CFPB rule would restrict access to overdraft services and reduce flexibility for banks to cover shortfalls. That framing helped build the legislative case for repeal. The report did not address what would happen to fee levels at institutions below the asset cutoff, where overdraft revenue has long been a significant income source and where competitive pressure from megabanks may be weaker.
Unanswered questions for smaller-bank customers
Several gaps in the public record leave consumers without clear guidance. The CFPB’s economic analysis focused on very large institutions, so there is no official estimate of how many overdraft fees are charged each year by community banks and credit unions or how those fees might change under different regulatory approaches. Without that baseline, it is difficult to quantify what customers of smaller lenders lost when the large-bank rule was repealed.
Another open question is how much competitive spillover will occur. In theory, if the largest banks had been forced to adopt a $5 fee, smaller institutions might have felt pressure to match or undercut that price to retain customers. With the rule gone, that benchmark never materializes, and community institutions face less incentive to voluntarily reduce fees that still generate reliable noninterest income. Some may tweak their overdraft programs for reputational reasons, but any such moves will be voluntary and uneven.
State law could eventually fill parts of the gap, yet most states have not imposed explicit dollar caps on overdraft charges. Instead, they rely on general standards of fairness and disclosure, leaving wide room for variation. Absent new federal action, consumers must navigate a patchwork of account terms, fee schedules, and opt-in forms that can differ sharply even between institutions of similar size.
For now, the most immediate consequence of Congress’s repeal is inertia. Large banks are no longer on a countdown to overhaul their overdraft programs, and smaller banks never were. The policy debate that produced projections of $5.2 billion in annual savings has shifted back to the status quo, in which overdraft pricing is largely a matter of institutional choice. Customers of community banks and credit unions, who were never directly covered by the CFPB’s rule, remain exposed to the same high fees that reformers targeted-and with no clear timeline for when, or whether, that will change.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
