Banks' $5.8 Billion Overdraft Racket: AGs Fight for $5 Cap to Protect Vulnerable Families

Picture a single mother in Oakland, scraping by on a cashier’s wage, who buys a $5 latte to stay awake for her second shift. The next day, her bank slaps her with a $35 overdraft fee. That’s not a penalty; it’s a shakedown. California Attorney General Rob Bonta gets it, and he’s not standing for it. On April 9, 2025, he rallied 23 state attorneys general to demand the U.S. House of Representatives protect a Consumer Financial Protection Bureau rule capping overdraft fees at $5. This isn’t just policy wonkery; it’s a lifeline for millions of Americans drowning in a system rigged against them.

Banks like JPMorgan Chase and Wells Fargo rake in billions annually from these fees, turning a small overdraft into a financial gut punch. In 2023 alone, overdraft revenue hit $5.8 billion, a windfall built on the backs of people who can least afford it. Bonta’s blunt take cuts through the noise: 'High overdraft fees serve no purpose other than to help the wealthy get wealthier, while American families who are already struggling get poorer.' He’s right, and the numbers back him up. For a $26 overdraft repaid in three days, a $35 fee translates to a jaw-dropping 16,000% APR. Call it what it is: predatory lending with a fancy name.

This fight isn’t new, but it’s hitting a fever pitch. The CFPB rule, if upheld, promises to save 23 million households $5 billion a year, or $225 per family stuck paying these fees. That’s real money, groceries on the table, not pocket change. Yet, the House stands at a crossroads, with pressure mounting from banking lobbyists to kill the rule and keep the profits flowing. It’s a choice between siding with struggling families or padding the yacht budgets of CEOs who, as Bonta quipped, name their boats 'Overdraft.'

Overdraft fees don’t hit everyone equally; they zero in on the vulnerable. Low-income households, especially Black and Hispanic families, bear the brunt. Studies show these groups are 84% and 89% more likely, respectively, to face these charges than their white counterparts. It’s a vicious cycle: a fee pushes an account into the red, triggering more fees, until the bank closes it entirely. Suddenly, a family’s locked out of the financial system, credit trashed, and stuck relying on payday lenders charging triple-digit interest. This isn’t an accident; it’s a feature of a banking industry that thrives on exclusion.

Bonta’s been sounding the alarm for years. Back in February 2024, he warned smaller banks and credit unions that these fees disproportionately hammer lower-income consumers and communities of color, hinting at violations of consumer protection laws. He’s not wrong. Historical data from the 1980s onward shows banks leaning harder into fee income as deregulation let them diversify beyond interest. By 1999, the Gramm-Leach-Bliley Act opened the floodgates, and today, noninterest income, including overdraft fees, makes up nearly half of bank revenue. It’s a profit model that’s evolved to squeeze the little guy while letting the big players off the hook.

Opponents, mostly banking execs and their allies in Congress, claim capping fees hurts financial inclusion. They argue banks will just raise minimum balance requirements or jack up other charges to offset losses. It’s a tired excuse. Capital One and Ally ditched overdraft fees entirely and still turn a profit. The real issue? Greed. The CFPB’s rule targets banks with over $10 billion in assets, the ones with the deepest pockets and the least excuse. Smaller institutions are exempt, yet the industry cries foul, hoping to dodge accountability while passing the buck to customers.

The timing couldn’t be more critical. President Trump’s administration has spent 2025 gutting federal oversight, with the CFPB caught in the crosshairs. New leadership has stalled rulemaking and enforcement, aligning with a deregulatory push that favors Wall Street over Main Street. Last month, the Senate voted to overturn the overdraft rule, a move Bonta called out as a betrayal of working people. Now, the House is the last bulwark, and state attorneys general like Bonta are stepping up where federal resolve falters. Their letter to Congress isn’t just a plea; it’s a battle cry.

Trump ran on making life affordable for Americans, but letting banks keep gouging consumers with $35 fees flies in the face of that promise. State AGs, from New York to Oregon, see through the hypocrisy. They’ve banded together, arguing that overturning this rule hands banks a free pass to exploit families already crushed by rising costs. It’s not abstract; it’s personal. In 2024, fee income from households spiked 10%, driven by credit card use, yet banks still lean on overdraft cash cows. Meanwhile, the House Financial Services Committee, chaired by Republican French Hill, seems poised to prioritize industry profits over voter wallets.

This isn’t uncharted territory. After the Great Recession, the Dodd-Frank Act of 2010 birthed the CFPB to shield consumers from financial predation. State AGs gained muscle to enforce federal protections, a role they’re flexing now as Trump’s team chips away at that legacy. Bonta’s track record speaks volumes: filing briefs against efforts to dismantle the CFPB, backing rules to close overdraft loopholes, and calling out banks for unfair practices. He’s not alone; 23 AGs stand with him, a coalition fighting for a system that doesn’t punish you for being broke.

The House vote isn’t just about numbers; it’s about who we value. Upholding the CFPB’s rule means telling banks their profit margins don’t trump a family’s ability to pay rent. It’s a chance to break a decades-long trend where fee income ballooned while financial inclusion lagged. Globally, innovations like Kenya’s M-Pesa show banking can lift people up, not lock them out. Here, 5.9 million U.S. households remain unbanked, many pushed there by fees they couldn’t escape. The $5 cap isn’t a cure-all, but it’s a start, a signal that government can still work for the people who elected it.

Rejecting this rule, though, sends a darker message. It tells Americans the system’s built to favor the powerful, that a bank CEO’s yacht matters more than their grocery bill. Bonta and his allies are right to frame this as a moral stand: 'Americans are counting on their elected leaders to protect them.' The House can prove them right or cave to the same old interests. For once, let’s bet on the little guy, not the fat cats who’ve been winning too long.