Overdraft fees in the US banking sector have risen to a four-year high! Consumer financial pressure intensifies, Democrats target CFPB regulation

The Zhitong Finance App learned that according to accounts from bank data and analysis service provider KBRA Financial Intelligence, the US banking industry collected a total of 1.6 billion US dollars in overdraft fees in the third quarter, an increase of 9.4% over the previous quarter, the highest quarterly level in four years. Economists say a surge in overdraft fees may be an early warning sign of deteriorating consumer health.

Furthermore, overdraft issues, consumer credit issues, and US President Trump's budget and staff cuts to the Consumer Financial Protection Bureau (CFPB) are all campaign topics for the Democratic candidate who won control of both houses of Congress in this month's midterm elections.

During the tenure of former President Joe Biden, overdraft fees were drastically reduced, and his administration emphasized consumer protection.

Democrats said they plan to review the CFPB's regulation and enforcement. Trump initially vowed to abolish the CFPB, then sought to weaken the agency's powers, but his efforts were blocked in court.

Democratic Senator Elizabeth Warren helped found the CFPB after the 2007-2008 financial crisis. She is expected to chair the Senate Banking Committee.

According to the data, overdraft revenue fell to an all-time low in the first quarter of 2025, when Trump took office. Congress then passed a resolution, which Trump signed in May to repeal a CFPB rule that originally set an overdraft fee limit of $5 per transaction, even though the rule never took effect.

Since then, overdraft fees have continued to rise. In the three months ending September, such fees were 23% higher than the first full quarter of Trump's second term. Even so, overdraft fees are still far below historic highs.

In addition to seeking court authorization to cut CFPB personnel, the Trump administration has also adjusted and contracted the CFPB's industry regulatory priorities. The agency no longer focuses on long-term core areas of regulation such as student loans, medical debt, digital payments, and consumer data.

“Overdraft fees charged by banks cannot be viewed separately from what is happening with the CFPB,” said Adam Rust, head of financial services at the American Consumer Federation.

Some experts see rising overdraft fees as an early warning sign of a weakening economy. Real wages in the US, adjusted for inflation, have continued to fall since April. According to data from Moody's analysis, auto loan and credit card overdue rates have not changed much in about a year.

“I wonder if an increase in overdrafts may be a leading indicator of the development of credit problems,” said Mark Zandi, chief economist at Moody's Analytics.

J.P. Morgan Chase and Wells Fargo account for the majority, with regional banks rising the fastest

J.P. Morgan Chase (JPM.US) and Wells Fargo Bank (WFC.US) collected a total of $590 million in overdraft fees in the third quarter, which is roughly equivalent to the sum of the remaining 20 largest banks. Overdraft fees for J.P. Morgan Chase increased 32% compared to the first quarter of 2025, and Wells Fargo increased 17%. Citibank (C.US) has eliminated overdraft fees in 2022.

Bank of America (BAC.US) overdraft revenue has risen 49% since the first quarter of 2025, but the $55 million scale is only a fraction of J.P. Morgan Chase or Wells Fargo. Bank of America reduced the overdraft fee from $35 to $10 in 2022 after the release of a CFPB report criticizing how large banks evaluate overdraft methods for consumer accounts.

J.P. Morgan Chase and Wells Fargo have both established grace periods and other practices in recent years to limit overdraft fees. A J.P. Morgan Chase spokesperson said that 75% of customer account overdraft transactions do not charge fees.

At many large regional banks, overdraft fees are rising the fastest. First Citizens Bank (FCNCA.US), headquartered in Raleigh, North Carolina, overdraft revenue increased 200% from the first quarter of 2025, the biggest increase among the 50 largest US lenders.

“A few banks try to get as much revenue as possible, but most tell us they don't want to charge fees that eventually have to be cancelled,” said J.V. Proesel, president of Moebs Services, who advises banks on account fees. “Our message to our clients is that the overdraft fee pendulum will eventually return, whether in 2028 or later. Regulators or legislators will pay attention to this issue.”