Senate Proposes Overdraft Fee Reform Bill

Senate Bank Overdraft Fees

Senate Proposes Crackdown on Bank Overdraft Fees in New Legislation

Washington, D.C. – March 28, 2025 – The U.S. Senate is taking aim at bank overdraft fees with a new bipartisan bill designed to protect consumers from what lawmakers call 'predatory' banking practices. The proposed legislation, introduced by Senators Elizabeth Warren (D-MA) and Josh Hawley (R-MO), seeks to drastically limit the fees banks can charge customers for overdrafts and require greater transparency in fee disclosures.

Key Provisions of the Bill

The Fair Banking Overdraft Act includes several major reforms:

Capping overdraft fees at
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3pertransaction,downfromthecurrentindustryaverageof35.

Limiting the number of overdraft fees a bank can charge to one per month and six per year.

Mandating real-time balance updates to help customers avoid overdrafts.

Requiring banks to offer low-cost overdraft protection programs as an alternative.

Senator Warren, a longtime critic of excessive banking fees, argued that overdraft charges disproportionately harm low-income Americans. 'Banks are making billions off the backs of working families who can least afford these outrageous fees,' she said in a statement. 'It's time to put an end to this exploitation.'

Senator Hawley echoed her concerns, framing the issue as a matter of fairness. 'No one should be hit with a
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35feefora5 coffee just because their paycheck hasn’t cleared yet. This is about holding big banks accountable.'

Banking Industry Pushback

Unsurprisingly, major financial institutions are pushing back against the proposal. The American Bankers Association (ABA) warned that reducing overdraft fees could lead to higher costs elsewhere, such as increased account maintenance fees or reduced access to free checking.

'Overdraft services provide a critical safety net for customers,' said ABA CEO Rob Nichols. 'Arbitrary caps could force banks to scale back services, hurting the very consumers this bill aims to protect.'

Public Support and Next Steps

Consumer advocacy groups, including the Consumer Financial Protection Bureau (CFPB), have praised the bill. A recent CFPB report found that overdraft and non-sufficient funds (NSF) fees cost Americans over $15 billion in 2023 alone.

The legislation now heads to the Senate Banking Committee for review. If passed, it could mark one of the most significant reforms to banking fees in over a decade.

What’s Next?

The bill will need to clear the Senate and House before reaching the President’s desk.

Some moderate Democrats and Republicans have expressed concerns about unintended consequences, setting the stage for potential amendments.

If enacted, the new rules could take effect as early as 2026.

For now, the debate over overdraft fees highlights a growing divide between consumer protection advocates and the financial industry—one that could shape the future of banking regulation in America.

—Reporting by [Your Name], Financial Policy Correspondent

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Senate Proposes Overdraft Fee Reform Bill

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