Did Republicans propose increasing bank fees, as Buttigieg said? There’s more to the story

Pete Buttigieg, who served as transportation secretary during former President Joe Biden’s administration and is mulling a Senate run in Michigan, criticized proposed legislation to overturn a Biden-era banking regulation. 

"I am not making this up: Republicans have introduced legislation… to increase your bank fees," Buttigieg said in a Feb. 18 X post. 

Buttigieg pointed to joint resolutions proposed by Rep. French Hill of Arkansas and Sen. Tim Scott of South Carolina, both Republicans, who chair their chambers’ banking committees. The resolution, which collectively has 25 other Republican co-sponsors, would overturn a recent Consumer Financial Protection Bureau rule that would cap overdraft charges from large banks and credit unions at $5 unless banks offered the service as a regulated loan.

Overdraft protection is a service many banks offer to cover purchases that cost more than an account’s balance. Customers are generally charged an overdraft fee in addition to paying back the original purchase price. 

If the rule goes into effect on Oct. 1 as it's scheduled to, overdraft fees would be capped at lower levels than what some banks typically charge now. Conversely, if the Republican legislation passes, overdraft fees at some banks would not decrease as they would have if the regulation took effect. The Republican resolution would keep the status quo and not increase current overdraft fees. 

Banking groups and the resolution’s supporters have called the Consumer Financial Protection Bureau’s rule an overreach that will hurt competition and limit options for consumers, including people who don’t have access to other credit lines. The Consumer Bankers Association has said its members would likely restrict the amount of overdraft services provided if a cap were enacted. 

A Buttigieg spokesperson declined to comment on the record.

The rule limiting overdraft fees was issued by the Consumer Financial Protection Bureau, a federal watchdog agency that protects consumers from unfair, deceptive or abusive practices. President Donald Trump’s administration has targeted the agency for cuts, and the administration said it will continue to operate in a streamlined fashion.

The rule would require banks and credit unions with more than $10 billion in assets that offer overdraft protection to choose one of the following actions: 

• Cap overdraft fees at $5 per transaction.

• Set an overdraft fee that’s equal to the cost of offering the service.

• Continue offering higher overdraft fees as a regulated loan, giving customers the choice to open a line of credit and providing disclosures on the loan’s terms.

Overdraft fees had been trending downward for years, with fee revenue falling by about half since 2019, but fees began ticking up slightly in 2024. A Bankrate survey found the 2024 average overdraft fee was about $27.08, slightly higher than 2023’s average of $26.61. Some banks do not charge anything for overdraft protection, but 94% of accounts are at banks that charge overdraft fees, Bankrate said.

Banking groups sued the Consumer Financial Protection Bureau in December over the overdraft protection rule, saying the agency overstepped its authority and the regulation would hurt consumers who don’t have access to other lines of credit. The rule’s critics said banks would have to raise fees elsewhere to make up for the lost income. 

Lauren Saunders, associate director of the National Consumer Law Center, a legal advocacy nonprofit that has supported the rule, said overdraft fees are effectively high-interest loans without some of the reporting and repayment regulations loans are subject to.

"They are allowed to charge these high fees and engage in a whole bunch of manipulative practices to push people into overdrafting because they’re not complying with federal law that governs loans," Saunders said. 

Banks must disclose their overdraft fees and policies according to Consumer Financial Protection Bureau policies, and customers must opt in to overdraft protection services. But the fees are exempt from some of the regulations governing other loans under the Truth In Lending Act.

The legislation is a tool Congress can use under the Congressional Review Act to overturn federal agency rulemaking. The joint resolution says Congress disapproves of the final rule and blocks the rule from taking effect. To become law, it requires approval by majorities in both chambers of Congress and the president’s signature. 

If the resolution becomes law, banks could continue charging current fees or increase them if they choose.

If the Consumer Financial Protection Bureau rule takes effect, banks could lower their overdraft fees, offer higher fees with more regulations or no longer offer overdraft protection. 

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Richard Shelby

stated on March 25, 2010 in a letter to Treasury Secretary Timothy Geithner

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Saunders said repealing the regulation "would increase bank fees from what they would be under the current regulation scheduled to go into effect."

The Consumer Bankers Association, a trade organization, challenged Buttigieg’s framing of the legislation. In a statement, association spokesperson Weston Loyd said the claim that the resolution increases overdraft fees "is plainly false and mentioned nowhere in the resolution."

When we asked Hill, the House Financial Services Committee chair, for a response to Buttigieg’s claim, Hill’s spokesperson pointed us to Hill’s interview with an Arkansas TV news station. Hill said in the interview he thinks consumers who overdraft their accounts out of necessity would be negatively affected by the rule. He said the rule could push some banks to stop offering overdraft protection or raise prices for other services. 

"If I can’t charge a reasonable return for this service, for this convenience, then I won’t offer it. Or I’ll raise prices somewhere else," he said.

Other trade groups have also argued the Biden-era rule would push banks to raise fees elsewhere. In a comment submitted to the Consumer Financial Protection Bureau about the overdraft protection rule, America’s Credit Unions said that rule and others would incentivize credit unions to raise monthly checking and savings account fees and increase loan and credit card interest rates. 

Regulations on fees would mean "no more free checking accounts, more expensive loan products, and less staff available for that individual support that is critical for so many credit union members," America’s Credit Unions Chief Advocacy Officer Carrie Hunt said in the letter. 

Saunders said higher monthly account fees are unlikely because competition among banks would keep account fees low. 

Buttigieg said Republicans introduced legislation "to increase your bank fees." 

The legislation would overturn a federal rule scheduled to go into effect Oct. 1 that would cap overdraft fees at $5 or require banks to offer overdraft protection as a regulated loan. The Republican resolution would not increase current overdraft fees. 

The resolution is not widely applicable to banking fees; it applies to a single type of banking transaction that only applies to people who overdraw their bank accounts — about 25% of U.S. households.

The statement contains an element of truth because if the federal rule that Republicans are proposing to eliminate were to go into effect, overdraft fees would decrease at some banks. But it’s a stretch to say that overturning a rule that hasn’t been implemented represents a cost increase for consumers. 

We rate the statement Mostly False.