Disapproving the Rule Submitted By the Bureau of Consumer Financial Protection Relating to ``Overdraft Lending: Very Large Financial Institutions''

Floor Speech

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Mr. HILL of Arkansas. Mr. Speaker, pursuant to House Resolution 294, I call up the joint resolution (S.J. Res. 18) disapproving the rule submitted by the Bureau of Consumer Financial Protection relating to ``Overdraft Lending: Very Large Financial Institutions,'' and ask for its immediate consideration in the House.

The Clerk read the title of the joint resolution.

Mr. Speaker, I rise in support of this joint resolution of disapproval.

Today, we can protect consumers and ensure continued access to financial services by voting to nullify the Consumer Financial Protection Bureau's disastrous rule on overdraft fees.

In a time burdened by the 40-year-high inflation, when many middle- and low-income households are living paycheck to paycheck, ensuring Americans have access to affordable credit has never been more important.

Overdraft protection is an optional service that financial institutions provide to help consumers avoid having purchases declined. Instead of the transaction being denied, the bank or credit union charges a flat fee to cover the check on behalf of that consumer. It lets that purchase proceed. It lets that payment to a utility company proceed. It lets that payment for an important rent or mortgage company to proceed, thereby allowing American families to take care of essential needs like that mortgage payment, rent payment, groceries, or gas before their next paycheck arrives.

Over the last decade, competition has driven financial institutions to lower their overdraft privilege fees to retain customers. Innovation has made accidental overdrafts less likely as many financial institutions now offer low balance alerts, automatic transfers from savings, and other tools to help consumers avoid being in overdraft and better manage their financial cash flow.

Competition and innovation, not government-mandated price caps, remain the best way to ensure consumers have access to affordable financial products and services.

Unfortunately, this CFPB rule undermines this very approach and threatens to restrict access to credit and overdraft privileges, which all of us should be concerned about.

The CFPB's rushed and haphazard approach to the rule is a clear example of how not to regulate. The CFPB made this decision before conducting meaningful research or considering the real-world consequences of its actions.

The CFPB's rule imposes a government-mandated price cap on what financial institutions may charge in the way of a fee for an overdraft privilege.

Like all price caps, this would reduce the availability of these very overdraft services, especially, Mr. Speaker, for consumers who have lower credit scores or are considered high risk.

By doing so, it effectively limits access to credit and that overdraft privilege for those who need it the most at the time they need it the most.

The CFPB's failure to consider the cost associated with this regulation, especially the real-world impact on consumers, their local community's financial institution, and the broader financial system only underscores the need to stop this price control before it is too late.

The CFPB also creates a false narrative of choice by suggesting that banks and credit unions can either offer an overdraft service at this federally mandated price fixed cost of $5 or comply with extending that as credit and, therefore, complying with the Truth in Lending Act. In other words, actually underwriting a consumer loan instead of simply offering the overdraft--simple, straightforward, fast, overdraft fee.

This redefinition of what products and services constitute credit thus is problematic, especially since Congress has already defined credit for regulatory purposes.

Even more troubling is the way the CFPB oversimplifies the costs of providing overdraft protection.

The rule only considers the cost of operating a call center and ignores the many other expenses involved such as ratifying and dealing with consumer disputes, mailing and postage for overdraft notices, third-party collection expenses, technology costs, and cost of regulatory compliance.

The reality is that these additional costs make it increasingly difficult for banks to continue offering overdraft protection. Many will simply choose to stop providing the service altogether. Those who will suffer the most from this are the very people the rule is designed to protect.

Mr. Speaker, in 2023, a survey found that 92 percent of customers who were aware their balance wouldn't cover a transaction preferred paying the overdraft fee rather than having their transaction declined. Not only is it inconvenient or potentially embarrassing in a particular situation, but it is also fundamental to in-between paycheck cash flow. They are making the decision to go into overdraft so they make that mortgage payment on time, despite buying clothes for back to school and trying to do Christmas shopping.

In my experience with my customers, over my many years of working with families, I never found one who was not a worthy steward of how to use these services.

Another survey found that 64 percent of customers think it is reasonable for a bank to charge an overdraft fee, and 72 percent feel these fees are justified, particularly when it helps them ensure timely payment of a much larger important bill, like a mortgage or rent.

In my experience of helping families across rural Arkansas for many years, as I said, managing their finances, they are pretty smart about how to do that, Mr. Speaker.

The truth is if the consumers lose access to overdraft protection, they will be forced to turn to alternative sources of credit that may be more expensive and riskier, have less consumer protection and documentation, and be less holistically handled than they would be at their home community financial institution or credit union.

I encourage all of my colleagues to support this resolution to restore common sense to our regulatory framework and ensure that consumers continue to have access to the financial services on which they rely.

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Mr. HILL of Arkansas. Mr. Speaker, let me say that the gentlewoman from California knows my respect for her and her leadership on our committee, but there is no effort here to raise overdraft fees in this resolution. It is quite the contrast. All we are saying is we don't need the Federal Government having a price cap on a product that is a very competitive product, with many, many banks not even charging for overdraft protection.

There is nothing hidden, Mr. Speaker, about fees on overdrafts. The Electronic Fund Transfer Act signed by this Congress made it clear decades ago that consumers must opt in to overdraft protection. Let me repeat that. Consumers select to do this. They shop for financial institutions online, down the street, whatever. They pick their credit union or bank to do business with. If they want overdraft protection to make sure that they are actually being protected on an extra payment or some bill they have between paychecks, they have it. It is completely spelled out.

Regulation DD in the Truth in Savings Act requires financial institutions to provide that information. Clearly, customers opt in to it.

Mr. Speaker, I promise you, I had it all through my early career when I couldn't make payments between paychecks. A young family, one income, lots of children, a lot of expenses, you do it. It is a good, prudent practice.

As a community banker for decades, I can promise you families were smart about it. There is nothing hidden about it. It is fully present. Consumers opt in to it, and the competition is intense to retain those customers.

Mr. Rose was the Commissioner of Agriculture in Tennessee before coming to Congress. He is a very active member of both the House Financial Services Committee and the Agriculture Committee. He has rural Tennesseans and their financial success at heart.

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Mr. HILL of Arkansas.

Let me say that the gentlewoman makes a good point about financial management when it comes to late fees and accelerated interest rates on credit cards. That is why we are actually talking about overdraft protection today, because time and time again people take advantage of affordable, convenient, disclosed, not hidden overdraft protection so that their family can avoid a late fee on a credit card, which she just gave an excellent overview of her concerns about.

If we want to do that, then give people the financial tools that they have in overdraft protection without micromanagement from the Federal Government. Don't take my word for it or anyone on this side of the aisle.

The Federal Reserve Bank of New York found that artificial price caps, like the one being discussed, being proposed by the CFPB on overdraft protection programs, reduced the supply, leading to fewer bank accounts for low-income families, period, full stop. I hear all the concern.

We are glad to have his voice in this debate.

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Mr. HILL of Arkansas. We are so delighted to have his expertise on our committee. He has a securities regulatory background. He was the State auditor. He serves on our committee and on the House Small Business Committee.
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Mr. HILL of Arkansas. He is a leader in every way and also in the House Foreign Affairs Committee.

Mr. Speaker, he has his two top advisers with him, Eleanor and Mary Clay.

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Mr. HILL of Arkansas. He is a former Congressman returning to the House Financial Services Committee.
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Mr. HILL of Arkansas. Mr. Speaker, I would like to inquire of my good friend from California if she has any other speakers.

Mr. Speaker, I thank my friends on this side of the aisle who have worked hard today, Mr. Speaker, to convince everybody in this body that this is a serious overreach by the CFPB in a Federal price mandate.

Instead of letting consumers choose their financial institution and choose which one has the lowest overdraft fees and the best consumer accounts, instead we have the Federal Government trying to tell people what the price can be. It is Federal price-fixing.

What the opposition has argued today is that these fees are hidden. They are not. Consumers opt into this product, Mr. Speaker. They know what the fee is because it is disclosed to them. It is required by Federal law today to disclose it under regulation DD.

This is about access for overdraft protection. One of my colleagues called it overdraft protection insurance so that they don't make a mistake and miss a mortgage payment, a rent payment, or a utility payment that causes higher costs, higher fees, and higher interest rates.

Two-thirds of consumers support overdraft protection products. Two- thirds of consumers think a reasonable fee is appropriate. Competition has brought down fees for years. In fact, many large banks don't even charge for overdraft protection.

The assertion that consumers complain about this all the time, Mr. Speaker, I am sorry, I don't find the evidence to that. Even the Consumer Financial Protection Bureau's own database shows that less than 1 percent of consumer complaints over this past decade even reference this kind of a product.

This is not a junk fee. This is an overdraft protection that helps millions of families across the country manage their payments and their bills between paychecks. It should be competitive and it should be accessible. We should vote ``yes'' on this resolution so that we agree with the Federal Reserve of New York when they say that to cap this fee to do price intervention here is to deny credit and deny this product to the hardest working families in America.

Mr. Speaker, I urge a ``yes'' vote, and I yield back the balance of my time.

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Mr. HILL of Arkansas. Mr. Speaker, on that I demand the yeas and nays.

The yeas and nays were ordered.

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