Community Banker: Overdraft rule will hurt those in need

this article was originally published on April 8, 2025 in the American Bankers Association Banking Journal

The Consumer Financial Protection Bureau’s cap on overdraft fees may only apply to large banks, but community banks and the customers they serve will be hurt as well, according to an opinion piece by Haylie Calicott, vice president and business development officer at First Security Bank and Trust Co. in Oklahoma City.

In a letter to the editor published in the Oklahoman, Calicott notes that First Security Bank and Trust is the only Black-owned minority depository institution in the state, and it primarily serves a Black demographic. “For many customers, overdraft protection provides a vital lifeline to ensure essential expenses are paid,” she writes. “Overdraft privilege for our customer base is often times their only option to make ends meet.”

The CFPB rule caps overdraft fees at $5 unless a financial institution meets certain conditions. It only applies to banks and credit unions with more than $10 billion in assets, but banks like First Security Bank and Trust compete with larger banks for customers and will need to reconsider their overdraft policies should the rule remain in place.

“If we determine that we cannot offer overdraft services at $5 per overdraft, we will be compelled to limit or end this valuable service,” Calicott writes. “Our customers may then turn to higher-risk products such as payday and vehicle title loans offered by less regulated nonbank lenders. That result benefits no one. Consumers ― not a government official ― should make decisions about the financial products and services they want to use.”

House and Senate leaders have drafted two resolutions to overturn the CFPB rule. The Senate last week voted 52-48 to approve the resolution. The House could take up its version of the resolution as early as this week.