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Higher bank fees?

That’s the $35 question. The Senate overturned a Consumer Financial Protection Bureau rule last week that capped overdraft fees at $5 instead of the standard $35. The vote was 52-48. Senator Josh Hawley was the only Republican to oppose the resolution. The resolution heads to the House of Representatives on Tuesday.

Republican Senator Tim Scott, who chairs the U.S. Senate Committee on Banking, Housing and Urban Affairs said that putting a limit on overdraft fees could harm low-income people. Quoting research from the Federal Reserve Bank of New York in his remarks on the Senate floor, he said:

Scott said that banks can use the revenue from overdraft fees to continue offering free checking accounts for people living paycheck to paycheck, and that overturning the CFPB’s overdraft fee structure is “good for consumers.”

The American Bankers Association celebrated the Senate vote, stating in a press release:

Senate Democratic Leader Chuck Schumer warned about lifting the $5 cap, saying it could lead to more junk fees for consumers, costing them an average of $225 a year, CBS News New York reported. Schumer said:

For context: When the CFPB issued the rule last December, the agency said it could save consumers up to $5 billion a year in overdraft fees. Banking trade groups quickly pushed back.

Social media’s reaction: People were divided on X following the news, debating whether overdraft fees reflect personal responsibility or a broken banking system. Some argued people should understand their bank’s fine print and not rely on overdrafts to manage their finances. Others said people should just opt out.

• “Balance your checkbook and don’t float checks. Problem solved, no overdraft fees. Next slide.”

• “My bank allows me to opt out of using the overdraft. Don’t spend more money than you have and you won’t have to worry about the overdraft fees.”

Some questioned Republicans:

• Why do conservatives want us to pay more in overdraft fees?

Then there were those who argued that mistakes with automatic payments happen, and $35 is too much to charge for an error. And others who said this decision just helps banks profit from people who are already struggling.

Rolling Stone chimed in with this headline:

A Fight Back! Poll

If you want to share your perspective on overdraft fees with your House representative ahead of Tuesday’s vote, you can find their contact information here.

The CFPB got thrown a life vest  

Speaking of the CFPB, a federal judge in Washington, D.C., on Friday blocked the Trump administration’s attempt to shut it down, according to reports.

The temporary injunction from Judge Amy Berman Jackson of the U.S. District Court also restores the CFPB’s operational ability, employees, access to data and contracts. 

For context: The CFPB was created by Congress after the 2008 financial crisis to protect Americans from unfair financial practices. But President Donald Trump and Elon Musk’s Department of Government Efficiency team have put it on the chopping block as part of efforts to cut federal agencies.

What’s next? The legal fight isn’t over. Judge Jackson has yet to issue a final order on the case. 

In a past newsletter, I explored the question of whether consumers would be safe without the CFPB. You can read different perspectives here. 

Life before the CFPB: Fight Back! flashback

Long before the CFPB existed, the Federal Reserve stepped in to regulate charge card issuers. In 1990, a Federal Reserve rule required banks, retail stores, credit card companies, and anyone issuing consumer credit cards to disclose fees upfront—including APRs, membership fees, transaction fees, late payment penalties and grace periods. The idea behind the rule was that forcing card companies to be more transparent would encourage consumers to compare offers, fostering competition that would push issuers to lower fees and interest rates to attract new customers.

In practice, however, most cardholders did not prioritize interest rates or annual fees when choosing a credit card. Bankers argued that disclosure laws would have little effect on interest rates, and similar laws in California and New York had failed to drive rates down before the federal rule took effect.

Every Saturday at 7:30 p.m. PST / 10:30 p.m. EST, I drop a vintage episode of Fight Back! With David Horowitz on YouTube. For exclusive clips and timeless consumer insights, make sure to tune in.

An update on burrito loans

I broke down the DoorDash and buy-now, pay-later provider Klarna partnership in a past newsletter, how the internet reacted, and what’s in the fine print of what many on social media called “burrito loans.” You can read the article here.

For context: Buy now, pay later (BNPL) loans are popular as an alternative to traditional credit cards, and retailers have been partnering with fintech companies like Klarna, Afterpay, and Affirm to offer shoppers BNPL options both in-store and online for everything from groceries to family vacations.

These loans work the way they sound: you buy now and pay them back over time. They are marketed as “interest-free,” but fees can apply, such as late charges or fixed interest rates. BNPL critics warn that using buy now, pay later loans can lead to overspending, mounting debt and potential overdraft fees if you are using auto pay.

I mentioned a lawsuit filed last October by fintech industry group, the Financial Technology Association (FTA), which Klarna is a member of. The lawsuit challenged a rule from the CFPB that classified BNPL products as credit cards. FTA challenged the rule as a poor fit for BNPL loans and said the CFPB overstepped its legal authority. 

In a win for the fintech industry, the CFPB said last week that it plans to revoke the rule, according to a court filing reported by Bloomberg Law. The CFPB said it would provide its next report on progress toward revoking the rule by June 2, and every 30 days after that, according to Bloomberg.

What’s next? Marketing industry forecaster eMarketer predicts BNPL will have more than 100 million users by 2027. And while its period of rapid growth may be over, eMarketer says the sector still has a long runway ahead. In the wake of the CFPB announcement, eMarketer notes that the BNPL sector is essentially back to square one on regulation, creating uncertainty for providers.