A lawsuit filed late Thursday by America’s Credit Unions and other financial services organizations challenges the CFPB’s final overdraft rule, saying it exceeds statutory authority and threatens to harm consumers. The CFPB finalized its rule Thursday morning, capping overdraft fees at $5 for financial institutions above $10 billion in assets. 

“The CFPB issuing its final rule on overdraft nearly a month before the Trump Administration is set to begin is risky behavior for a regulator and for the consumers they claim to protect. Not only does it exceed the bureau's authority, but it threatens to eliminate financial protections for consumers. Everyone should have access to services that allow them to make ends meet without having to choose between buying groceries or paying a utility bill,” said America’s Credit Unions President/CEO Jim Nussle. “These financial hardships have serious consequences on families, and overdraft programs provide an affordable lifeline in these circumstances. America’s Credit Unions' mission is to ensure consumers can partner with credit unions for their financial health and to achieve their best lives. The association is going to continue to fight through legal action to reverse this grave mistake from Director Chopra.” 

The organizations flag the final rule overturns a “half-century of consistent interpretation” of the Truth in Lending Act (TILA). 

“Most fundamentally, overdraft products are not ‘credit,’ as customers do not have a right to incur overdrafts or defer repayment of the overdraft; as such, they cannot be regulated under TILA,” the filing reads. “Moreover, the CFPB far exceeds the disclosure-related scope of TILA by imposing price caps and significant substantive restrictions on the terms under which these products can be offered.”

The filing also notes the $10 billion threshold for the rule “will undoubtedly have ripple effects across the industry,” including on small financial institutions, yet the bureau failed to conduct analysis required by the Regulatory Flexibility Act.

America’s Credit Unions, Consumer Bankers Association, American Bankers Association, and the Mississippi Bankers Association jointly filed the challenge. 

America’s Credit Unions raised concerns about the proposed rule with the bureau and Congress, including testimony before the Senate Banking Committee and a House Financial Services subcommittee. Credit union overdraft services are regulated and members must opt-in to use them.