Barr calls CFPB overdraft proposal ‘misguided’

U.S. Rep. Andy Barr (R-KY) and a Republican colleague on the U.S. House Financial Services Committee denounced a proposed rule issued on Jan. 17 by the Consumer Financial Protection Bureau (CFPB) that seeks to rein in overdraft fees charged by the nation’s biggest financial institutions.

“The proposed rule issued today by the CFPB would undermine the bureau’s consumer protection mission,” said Rep. Barr and U.S. Rep. Patrick McHenry (R-NC), chairman of the House Financial Services Committee, in a joint statement released on Wednesday. “We urge the CFPB to withdraw this misguided proposal that harms the very consumers the agency was created to protect.”

According to the CFPB, the proposed rule would close an outdated loophole that exempts overdraft lending services from provisions of the Truth in Lending Act and other consumer financial protection laws.

Approximately 23 million households pay overdraft fees in any given year, says the CFPB, which estimates that the proposed rule could save consumers $3.5 billion or more in fees per year with potential savings translating into $150 for households that pay overdraft fees.

However, Rep. Barr, chairman of the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, and Rep. McHenry think the proposal actually harms consumers.

They pointed out that overdraft protection is a short-term liquidity product that can aid consumers in making ends meet when a deposit account balance is low, and this is particularly helpful for consumers who are unable to qualify for traditional credit products, according to their statement.

“This proposed rule will further reduce access to the short-term liquidity products that millions of Americans rely on to help make ends meet,” said the lawmakers. 

Rep. Barr and his colleague also said that the Biden administration’s attempts to mandate one-size-fits-all consumer financial products and services “diminish financial inclusion, limit consumer choice, stifle innovation, and ultimately raise the cost of banking for all consumers.”