Consumers
Joe Biden
President Joe Biden
Joe Biden

In 2022 alone, banks made nearly $8 billion off of charging overdraft fees to low-income Americans whose accounts went below zero — sometimes charging broke customers as much as $37 per overdraft. Now, a new proposed rule by President Joe Biden's administration would limit those fees to as little as $3.

The Consumer Financial Protection Bureau (CFPB) announced the new proposed rule on Wednesday, which would limit overdraft fees to as little as $3 per transaction. The CFPB says the rule — which affects banks with more than $10 billion in assets — would save approximately 23 million American households a total of $3.5 billion per year. Essentially, the rule would close a loophole banks exploited that exempted overdraft lending services from the Truth in Lending Act and other similar legislation aimed at protecting bank customers.

"Decades ago, overdraft loans got special treatment to make it easier for banks to cover paper checks that were often sent through the mail," CFPB Director Rohit Chopra stated. "Today, we are proposing rules to close a longstanding loophole that allowed many large banks to transform overdraft into a massive junk fee harvesting machine."

The Truth in Lending Act, which was passed in 1968, required financial institutions to disclose the full costs of providing loans to customers. At that time, many families sent checks in the mail, and were unsure of when funds would actually be withdrawn and when a cleared check would post to the account holder's balance. This occasionally resulted in an account being overdrawn, after which the bank would issue a loan to cover the difference.

In 1969, when the Federal Reserve Board of Governors was establishing guidelines for the Act's implementation, they allowed an exception in the rules for banks if a depositor "inadvertently" overdrew their account. In the 1980s and 1990s, when debit cards began replacing checks as the primary form of conducting transactions, banks started charging sky-high fees to capitalize on overdraft loans, raking in billions in extra profit. JPMorgan Chase and Wells Fargo are two of the biggest offenders — according to the CFPB, those two banks raked in roughly a third of overdraft fees reported by banks over $1 billion.

"Many banks and credit unions already provide lines of credit tied to a checking account or debit card when the consumer overdraws," the CFPB stated on its website. "The proposal provides clear rules of the road to ensure consistency and clarity."

A post to the CFPB's website established several proposed overdraft fee limits of $3, $6, $7 or $14 solely to help banks recoup costs of issuing overdraft loans rather than as a profit driver, and is soliciting public comment on the appropriate amount.

Reprinted with permission from Alternet.

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Joe Biden
President Joe Biden
Photo by LBJ Library

The Biden administration on Friday announced plans to repeal federal rules put in place by the Trump administration that allowed short-term insurance plans that were not subject to Affordable Care Act requirements to run for up to three years.

“These plans leave families surprised by thousands of dollars in medical expenses when they actually use health care services like a surgery,” the White House said in a statement. “If finalized, the rule would limit so-called ‘short-term’ plans to truly short time periods, close loopholes made worse by the previous administration, and establish a clear disclosure for consumers of the limits of these plans.”

The rule allowing the sale of supposedly short-term plans with longer actual terms, described by some experts as “junk insurance,” was put in place by the Trump administration in 2018. The implementation of the rule came after the failed Republican attempt to repeal the Affordable Care Act, better known as Obamacare, in 2017. Unlike plans subject to Affordable Care Act regulations, short-term plans are allowed to deny coverage to people with preexisting conditions and cover fewer prescription drugs. The plans also often lack maternity coverage and coverage for treatment for substance abuse.

A 2018 report from the National Association of Insurance Commissioners found that short-term plans spend less on medical care than plans that have to comply with Affordable Care Act rules.

“Such non-comprehensive coverage can be particularly harmful to low-income individuals and individuals with significant health care needs, as they would face the greatest health and financial consequences from inadequate insurance coverage,” the Department of Health and Human Services said in a statement released on Friday announcing the Biden administration’s new policy.

Despite their shortcomings, former President Donald Trump promoted the plans at a White House event in 2018, describing them as “much less expensive health care at a much lower price.”

If the new rule is finalized, it would once again limit short-term plans to three months, a limitation former President Barack Obama’s administration put in place in 2016.

President Joe Biden has prioritized expansion of the 2010 health care law since taking office.

The Biden administration has promoted the annual enrollment period through health care exchanges and increased funding for health insurance “navigators” to assist people in signing up after the Trump administration cut the funding for the promotional period and for navigators. The Biden administration announced in January that 16.3 million people had signed up for coverage during the 2022-2023 enrollment period, breaking the record for the second year in a row.

The American Rescue Plan, which Biden signed in 2021, extended subsidies for plans covered by the Affordable Care Act. The Inflation Reduction Act, which Biden signed in 2022, further extended the subsidies through 2025.

Speaking about the issue at a White House ceremony in March marking the law’s 13th anniversary, Biden said, “The Affordable Care Act has been law for 13 years. It has developed deep roots in this country. It has become a critical part of providing health care and saving lives.”

Reprinted with permission from American Independent.