CFPB, Overdraft Lending: Very Large Financial Institutions, Final Rule (89 Fed. Reg. 106768, Dec. 30, 2024)

The rule that would have made an overdraft a loan. Repealed by Congress before it took effect (see pl-119-10-overdraft-rule-disapproval-2025).

The word, in the government’s own text. The rule’s operative sentence: “Under this final rule, Regulation Z will generally apply to overdraft credit provided by very large institutions unless it is provided at or below costs and losses as a true courtesy to consumers.” The word “courtesy” appears 36 times in the document.

The origin of the exception. The rule records where the loophole came from: “Non-covered overdraft credit started as a courtesy that individuals within financial institutions provided when they would decide on an ad hoc basis to pay particular check transactions into overdraft rather than returning those checks unpaid.” When the Federal Reserve Board first adopted Regulation Z in 1969, it excepted from the definition of “finance charge” any charge for honoring a check that overdraws an account, unless the payment and the fee had been agreed in writing beforehand.

What the courtesy became. The rule states that overdraft fee revenue “is still a source of billions of dollars in profits every year, and most very large financial institutions continue to charge $35 per overdraft transaction today,” and that institutions now “generally make pay/no-pay decisions in advance … by setting overdraft limits that the consumer may not be aware of.” The rule names this: “a significant departure from the historical courtesy model.”

Who pays it. The rule states in its own text: “Black households and Latino households are more likely to incur overdraft fees than white households.” Its footnote 64 records 26% of Black households and 14% of white households reporting an overdraft (1.9x), and cites the CFPB’s own December 2023 report finding Black and Hispanic consumers 69% and 60% more likely to live in a household charged an overdraft or NSF fee.

Retrieval note: federalregister.gov bot-blocks automated fetch. The full raw text is served, without blocking, at https://www.federalregister.gov/documents/full_text/text/2024/12/30/2024-29699.txt.