On December 12, the Consumer Financial Protection Bureau (CFPB or Bureau) announced the finalization of its rule addressing overdraft fees. The rule targets financial institutions with more than $10 billion in assets, imposing new restrictions and requirements on how these institutions manage and charge for overdraft services. However, with the upcoming change in administration, questions remain as to whether the final rule will ever take effect.

An overdraft occurs when a consumer does not have a sufficient account balance to pay a transaction, but the financial institution pays it anyway. Usually, the financial institution pays an overdraft transaction by either transferring the consumer’s own funds from another account, such as a savings account, or by extending overdraft credit, i.e., using the financial institution’s own funds and requiring the consumer to repay. Today’s rulemaking amends Regulations Z and E to provide that extensions of overdraft credit offered by very large financial institutions are required to adhere to consumer protections applicable to other financial products such as credit cards, unless the overdraft fee is at or below the institution’s costs and losses.

Key Provisions of the Final Rule

The CFPB’s final rule, effective October 1, 2025, introduces several significant changes to how large financial institutions can manage and charge for overdraft services:

  • Cap on Overdraft Fees: Institutions can choose to cap their overdraft fees at $5, which is estimated to cover the costs associated with administering a courtesy overdraft program.
  • Cost-Based Fees: Alternatively, institutions can set their fees based on the actual costs and losses incurred from providing overdraft services.
  • Disclosure Requirements: Institutions that choose to offer overdraft lending at a profit must comply with existing lending regulations applicable to products like credit cards. Specifically, this would include giving consumers a choice on whether to open the line of overdraft credit, providing account-opening disclosures, sending periodic statements, and giving consumers a choice of whether to pay automatically or manually.

Changes from the Initial Proposal

The final rule includes several updates from the initial proposal:

  • Regulation Z and E Amendments: The rule amends Regulations Z and E to require that overdraft credit offered by large institutions adheres to consumer protections required for other products. The rule also removes an exception to Regulation E’s compulsory-use prohibition for covered overdraft credit. As a result, covered overdraft credit offered by very large financial institutions cannot be conditioned on consumer repayment by automatic electronic fund transfers from the consumer’s account. Instead, the financial institution must offer at least one method of repaying an overdraft credit balance other than automatic repayment by preauthorized electronic fund transfer. Consumers could still opt into automatic repayments if offered, but they have the right to repay this overdraft credit manually if they prefer.
  • Separate Credit Accounts: Overdraft credit must be structured as a separate credit account, rather than as a negative balance on a checking account.
  • Hybrid Debit-Credit Cards: The rule applies credit card provisions to hybrid debit-credit cards used to access overdraft credit.

Our Take

The finalization of this rule comes at a time of significant regulatory uncertainty. As discussed in connection with the final rule on digital payment apps, found here, President-Elect Trump is expected to replace Director Chopra early in his administration, which could lead to the rescinding or modification of this rule. Additionally, the Congressional Review Act (CRA) provides Congress with the ability to reject recent federal regulations within 60 legislative days by a simple majority vote in both chambers. If CRA legislation is signed by the President, the rule would be rescinded and the CFPB would be prohibited from issuing a substantially similar rule without explicit legislative authorization.

We will continue to monitor this rulemaking and provide updates.