NEW YORK—New York’s Department of Financial Services is proposing to ban state-chartered banks from charging an overdraft fee on transactions of $20 or less.
New York Governor Kathy Hochul made the announcement on her website, stating the proposal is part of her office’s 2025 State of the State Proposal.
The DFI has posted the proposed regulations here.
“These regulations ensure consumers will no longer be burdened with overdraft fees for minor transactions and require banks to provide timely notifications to consumers about overdraft fees to improve transparency,” Hochul’s office stated.
“With hidden fees and unfair practices, it has become increasingly more difficult for hard-working New Yorkers to keep up,” Hochul said. “It is time that we hold banks accountable and lighten the burden of high overdraft fees for minor transactions to keep New Yorkers’ hard-earned money in their pockets.”
“A healthy market grows when consumers have confidence and trust in the products offered and the providers offering them,” stated New York State Department of Financial Services Superintendent Adrienne Harris. “Today’s proposed regulation ensures that consumers will no longer be taxed with surprising and disproportionate fees for using the overdraft services provided with their bank accounts.”
Hochul’s office said the proposed regulations eliminate the “most exploitative and deceptive banking fees, cap overdraft fees, strengthen customer communications and establish stricter transaction processing requirements.”
Proposed Rule
According to the proposed regulations, state-chartered banks would be prohibited from:
- Charging overdraft fees on overdrafts of less than $20
- Charging overdraft fees that exceed the overdrawn amount
- Charging more than three overdraft or non-sufficient funds fees per consumer account per day
- Charging NSF fees for instantaneously declined electronic transactions
- Charging multiple NSF or overdraft fees for the same transaction, including when a merchant resubmits a declined transaction
- Charging a “sustained,” “continuous,” or “daily” fee for each day an overdraft balance is not repaid
- Charging double fees to cover an overdraft, such as one fee for automatically transferring funds from another account and a second fee for the overdraft itself
- Processing electronic debit transactions in a manner intended to maximize the number of overdraft and NSF fees
- Charging an overdraft fee for an electronic transaction when the consumer’s account indicates sufficient funds at the time the transaction was initiated
The proposal follows the CFPB’s move late last year to cap overdraft fees at $5 for financial institutions with $10 billion in assets and above. The CFPB’s rule, analysts have stated, would not only bring down the price of overdrafts among all FIs due to competition, but could spark separate rules from individual states.