Capitol Hill Republicans are looking to scrap a pair of major consumer protection rules as they seek to roll back some of the Biden administration’s last-minute regulatory moves.
Last week, GOP leaders took their first step toward nixing a $5 cap on bank overdraft fees, which had provoked furious opposition and a legal challenge from the financial services industry. On Thursday, meanwhile, they signaled plans to do away with a regulation that would subject major digital payment apps like Venmo and Apple Pay to stricter oversight.
The Consumer Financial Protection Bureau finalized both measures, which have yet to be implemented, after President Donald Trump’s victory in November, defying Republicans who had warned the agency against “midnight rulemakings.” Lawmakers are now looking to undo them using the Congressional Review Act, which allows the House and Senate to reverse recently completed regulations by passing a joint resolution that must be signed by the president.
The Trump administration has already put the CFPB’s regulatory and enforcement work on ice as its officials have sought to essentially dismantle the agency. But formally undoing the rules would prevent them from ever being put into effect if the consumer watchdog resumes its work.
It could also potentially prevent a future Democratic administration from trying to revive the regulations, since the Congressional Review Act bars agencies from bringing back rules in “substantially the same form” once they’ve been killed.
The CFPB estimated that its overdraft rule would save consumers approximately $5 billion a year, by capping the fees charged by large banks at either $5 or the breakeven cost of offering the service. Today, the charges average about $27 a pop.
Banks levy overdraft fees in return for letting customers draw their balances below zero, a feature they argue acts as a short-term source of cash when people are hit with unexpected expenses. But consumers have often found themselves ambushed by the charges after accidentally overspending from their checking accounts; in a 2023 poll, a slight majority of Americans agreed that the government should encourage banks to eliminate the charges.
Some banks have been doing just that, with major names like Bank of America, Citibank, and Capital One either drastically reducing the fees or eliminating them altogether. Between 2019 and 2023, the CFPB found that the amount of revenue banks took in from overdraft and insufficient funds fees fell by more than half to just under $6 billion.
The agency’s new rule, which it finalized in December, would eliminate much of that remaining revenue. It drew hackles from the banking industry, which sued to stop it, as well as warnings that banks would be forced to drop overdraft services entirely. Congressional Republicans, meanwhile, accused the CFPB of overreach. Last week, House Financial Services Committee Chair French Hill and Senate Banking Committee Chair Tim Scott introduced a joint resolution to overturn the rule.
“The CFPB’s actions on overdraft is another form of government price controls that hurt consumers who deserve financial protections and greater choice,” Hill said in a statement announcing the move.
The demise of CFPB’s rule on digital wallets and payment apps would have a less directly noticeable impact on consumers, but it would mean significantly less oversight for tech companies that have expanded into financial services.
The measure, finalized in November, would cement the CFPB’s power to supervise payment platforms not run by banks. It would not create any new legal limits on companies but would allow the agency to proactively examine their records and interview their employees to make sure that they were complying with consumer protection laws and properly protecting their users from fraud.
The rule would only apply to the narrow slice of apps that handle at least 50 million transactions annually, including Apple Pay, Google Pay, PayPal, Venmo, and others, which currently dominate the industry. But it presumably would have covered Elon Musk’s X if that platform’s planned payments service eventually grew large enough.
Large banks were largely supportive of the regulation, which would subject tech companies to the same sorts of scrutiny they themselves have long faced. But Republicans have argued that the rule was unnecessary and overbroad. Some had doubted that the GOP would invest the floor time necessary to overturn the rule, given that it was already facing a legal challenge from tech firms. But on Thursday, House Majority Leader Steve Scalise included it on a list of regulations Republicans might challenge via the Congressional Review Act.
If the rule is overturned, federal regulators will still be able to bring lawsuits against payment apps for failing to handle fraud or cheating consumers, much as the CFPB has against CashApp and the group that runs Zelle. But without supervision powers, the agency won’t be consistently monitoring how large payment apps do business.
Jordan Weissmann is a senior reporter at Yahoo Finance.
