This mandate will reduce access to overdraft protection for the very people who need it most—working families living paycheck to paycheck who rely on temporary coverage to avoid bounced checks, late fees, and utility shut-offs.
As Iowans continue to benefit from sound fiscal policies like accelerated tax cuts and conservative budgeting, we cannot lose sight of what’s happening in Washington. In a troubling—but completely predictable—display of regulatory overreach, the Consumer Financial Protection Bureau (CFPB) has finalized a rule that threatens to remove an important financial tool from low-income Americans while expanding the power of unelected bureaucrats.
Finalized in December and set to take effect this October, the rule caps overdraft fees at $5 per transaction for banks with more than $10 billion in assets or forces them to treat overdrafts like credit, complete with disclosures and loan-style compliance. While this is being promoted as consumer-friendly, the truth is actually far more concerning. This mandate will reduce access to overdraft protection for the very people who need it most—working families living paycheck to paycheck who rely on temporary coverage to avoid bounced checks, late fees, and utility shut-offs.
For many Iowans, overdraft services are not “junk fees,” as the CFPB misleadingly labels them. They are used for a purpose—to pay for gas to get to work, buy groceries, or keep the lights on. Removing or limiting these services won’t eliminate financial strain; it will simply make life harder. When banks scale back access due to regulatory burdens, those in need will turn to more expensive alternatives like payday loans, pawn shops, or worse.
What’s particularly alarming is that the CFPB admits it lacks solid data on how consumers will respond. In their rush to push this rule through during the final days of the Biden administration, they acknowledged there is “little reliable quantitative evidence” to support their decision. Yet they charged ahead anyway, risking significant unintended consequences in the name of politics over practicality.
Beyond the rule’s harmful effects, its process raises serious concerns about government accountability. The CFPB has asserted jurisdiction over overdraft services by redefining them as loans—a legal maneuver that bypasses Congress and sidesteps regulatory agencies like the FDIC and OCC, which traditionally oversee banking practices. Compounding the issue, the CFPB receives its funding through the Federal Reserve, placing it outside the reach of congressional appropriations and insulating it from oversight.
This lack of accountability is dangerous. It allows the CFPB to act unilaterally without answering to the people or their representatives. In Iowa, we’ve seen firsthand the power and benefits of fiscal restraint, local control, and respect for individual freedom. The CFPB’s actions run counter to those values. This is not consumer protection. It is centralized decision-making that limits choice and drives up costs for working families.
Congress has the opportunity to stop this misguided policy by passing a Congressional Review Act (CRA) resolution to overturn the rule. Doing so would restore balance, protect access to essential financial tools, and reassert the role of lawmakers in shaping policy that affects millions of Americans.
Iowans for Tax Relief Foundation stands for limited government, free markets, and personal responsibility. Each member of Iowa’s congressional delegation has advocated for those same principles, too. Now they have a chance to turn those campaign talking points into action by embracing the CRA and rejecting the CFPB’s overreach. This rule may be well-intentioned, but its consequences are real—and harmful. Government exists to serve, not to dictate. Let’s make sure Washington doesn’t forget that.
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