Republicans on Capitol Hill are aiming to eliminate two significant consumer protection regulations as part of their effort to reverse several last-minute regulatory decisions made by the Biden administration.
Last week, GOP leaders initiated the process to abolish a $5 cap on bank overdraft fees, which faced intense backlash and a legal challenge from the financial services sector. On Thursday, they also hinted at plans to abolish a regulation that would impose stricter oversight on major digital payment platforms like Venmo and Apple Pay.
The Consumer Financial Protection Bureau (CFPB) concluded both regulations, which have not yet taken effect, following President Donald Trump’s election victory in November, contrary to Republican warnings against “midnight rulemakings.” Lawmakers are now aiming to repeal these regulations via the Congressional Review Act, allowing the House and Senate to rescind recently finalized regulations through a joint resolution that the president must approve.
The Trump administration has already put the CFPB’s regulatory and enforcement actions on hold as officials work toward essentially dismantling the agency. However, formally overturning these rules would prevent them from being implemented if the consumer watchdog resumes its activities.
Additionally, it could prevent a future Democratic administration from attempting to revive these regulations, as the Congressional Review Act prohibits agencies from reinstating rules in “substantially the same form” once they have been rescinded.
Here’s what consumers might be losing.
Read more: What is overdraft protection, and how does it work?
The CFPB projected that its overdraft regulation would save consumers around $5 billion annually by capping fees charged by large banks at either $5 or the service’s break-even cost. Currently, these fees average approximately $27.
Banks impose overdraft fees to allow customers to withdraw funds below zero, which they claim offers a temporary cash flow solution during unexpected expenses. However, consumers often find themselves trapped by these fees after an unintentional overspend from their checking accounts; a 2023 survey indicated that a slim majority of Americans believe the government should incentivize banks to abolish such charges.
In response, some financial institutions have begun making changes, with prominent banks such as Bank of America, Citibank, and Capital One significantly reducing or completely eliminating these fees. Between 2019 and 2023, the CFPB reported that banks’ revenue from overdraft and insufficient funds fees declined by over 50% to just below $6 billion.
The new rule finalized by the agency in December aims to eliminate the remaining revenue from overdraft fees, prompting backlash from the banking sector, which has sought legal action against it, alongside warnings that such measures could force banks to retract overdraft services entirely. Congressional Republicans have labeled the CFPB’s actions as overreach. Recently, House Financial Services Committee Chair French Hill and Senate Banking Committee Chair Tim Scott proposed a joint resolution to rescind this regulation.
“The CFPB’s regulation on overdraft constitutes another instance of government-imposed price controls that harm consumers, who deserve better financial protections and more options,” Hill stated, announcing the resolution.
The potential repeal of the CFPB’s regulation regarding digital wallets and payment applications may not be immediately noticeable for consumers, but it would significantly reduce oversight for tech companies entering the financial services arena.
Finalized in November, the measure would grant the CFPB more authority to oversee payment platforms that are not bank-operated. While it doesn’t impose any new legal restrictions, it would enable the agency to actively audit their operations and interview employees to ensure compliance with consumer protection laws and safeguard users against fraud.
This rule would specifically apply to a select number of apps that handle at least 50 million transactions per year, including industry leaders like Apple Pay, Google Pay, PayPal, and Venmo. It would likely have extended to Elon Musk’s X if its planned payment services reach the required volume.
Read more: Is it safe to store money in apps like Venmo, PayPal, and Cash App?
Major banks largely supported this regulation, as it would place tech firms under similar scrutiny to what they have historically faced. Nonetheless, Republicans contend that the rule is unnecessary and overly broad. Some had questioned whether the GOP would dedicate the time needed for floor debates to overturn it considering ongoing legal challenges from tech companies. Yet on Thursday, House Majority Leader Steve Scalise included this rule on a list of regulations that Republicans may contest through the Congressional Review Act.
If this rule is overturned, federal regulators can still initiate lawsuits against payment applications for failing to manage fraud or defrauding consumers, similar to actions the CFPB has taken against CashApp and the operators of Zelle. However, without supervisory authority, the agency would not consistently monitor the operations of major payment apps.
Jordan Weissmann is a senior reporter at Yahoo Finance.
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