In a move aimed at enhancing consumer protection, New York Gov. Kathy Hochul unveiled new proposed regulations on overdraft and non-sufficient funds (NSF) fees as part of her 2025 State of the State address. These changes, spearheaded by the New York Department of Financial Services (DFS), are designed to curb what the state deems as unfair banking practices, particularly those related to overdraft fees for minor transactions.
Key Highlights of the Proposed Regulations:
- Overdraft Fee Limits: The new rules prohibit banks from charging overdraft fees on transactions under $20.
- Fee Transparency: Banks will be required to notify consumers promptly about potential overdraft charges, providing more transparency on the costs associated with overdrafts and NSF transactions.
- Cap on Overdraft Fees: The regulations also limit the number of overdraft or NSF fees that can be charged to a consumer account to three per day. The fees themselves are capped and must not exceed the overdrawn or NSF transaction amount.
- Prohibition on “Continuous” Fees: Banks will no longer be able to charge “sustained,” “continuous,” or “daily” fees for overdrafts that remain unpaid.
- No Double Fees: Banks are also prohibited from charging double fees, such as one for transferring funds from another account to cover the overdraft and another for the overdraft itself.
- Settlement Order Requirements: Banks will be prohibited from settling transactions in a way that maximizes the number of overdraft and NSF fees charged. For example, they will not be allowed to process transactions from largest to smallest to increase the likelihood of fees.
This initiative comes after a 2022 DFS study which highlighted the disproportionate impact of these fees on lower-income New Yorkers. The proposed changes reflect Governor Hochul’s broader affordability agenda, which includes cracking down on predatory fees across various sectors.
The public comment period for these proposed regulations is now opens.
