12:18 PM EDT, 04/03/2024 (MT Newswires) -- The American Bankers Association said Monday the rules proposed by the Consumer Financial Protection Bureau reinterpret overdrafts as credit while imposing a usury cap, contradicting a founding statute that prohibits the bureau from setting interest rates.

The proposed amendments to Regulation Z conflict with the text of the Truth in Lending Act, the association said in a letter posted in comments to the agency.

"By imposing additional -- and onerous -- requirements on overdrafts priced above the breakeven or benchmark fee, the proposal impermissibly establishes a usury limit," the letter said.

The bureau's proposal introduces "overdraft credit" for transactions made with insufficient funds, subject to Regulation Z unless banks charge a "true courtesy" overdraft fee based on breakeven costs or a benchmark fee.

The proposed benchmarks are set at $3 to $14 with the bureau aiming to bring down overdraft fees from $35 and save consumers $3.5 billion or more in fees per year.

The bureau's proposal "would effectively bring an end to overdraft services for millions of consumers who -- following receipt of a consumer-tested disclosure -- choose to use to the product to cover emergency expenses and other liquidity shortfalls, all to advance the administration's political campaign against `junk fees,'" the letter said. "We call on the bureau to withdraw the proposal."

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