On Monday, the comment period closed for a plan announced in January by the Consumer Financial Protection Bureau (CFPB) that would impose a command-and-control, single government-set price for all overdraft services offered by banks of $10 billion or more in assets.

The likely result of this terrible plan? Vulnerable people will be less likely to be able to pay for groceries, utilities, and other vital goods and services.

When asked in a recent national survey by the Consumer Bankers Association (CBA) to identify the types of purchases enabled by their most recent overdraft transactions, the leading categories included food (30%), utilities (25%), and transportation costs (18%).

Unfortunately, falling behind on many of these transactions triggers a domino effect of cascading other financial penalties like late fees if they miss utility bills, car payments, rent/mortgage, etc.

Perhaps most notably the survey shows that a mere 6-10% of consumers that report having overdrafted said they were willing to forgo the transaction in lieu of using overdraft services. That means that 90-94% of the time, overdraft products add value to customers’ lives in important ways.

Consumers who report overdrafting four or more times in the past year say that they lack credit alternatives: 67% state they had been denied a credit card in the past, compared to only 34% of consumers who report not having overdrafted in the past year. It seems the CFPB would rather push these customers into a corner or force them into murky waters of unregulated, black market lending or having to pawn or sell household items.

Want to keep grandpa’s precious WWII watch? Sorry, President Biden’s CFPB would rather you didn’t.

While using a credit card is sometimes a better option for covering short-term gaps in funds, it is not an option that is available to everyone. Reducing access to overdrafts can have serious consequences for those unable to receive access to traditional, lower-cost credit products.

Additionally, frequent overdrafters were less likely to report being able to use credit cards (10%) than non-frequent overdrafters (23%) if they lost access to overdraft services. Most concerning is that frequent overdrafters were more likely to choose to pay late (37%) than non-frequent overdrafters (19%) to cover a gap in funds if they lost access to overdraft services. 

Paying late can have additional financial and health consequences including late fees, shut-off of utility services, lower credit scores, and negative health impacts of forgoing food and grocery purchases. And Biden claims to care about poor people.

Interestingly, the study found that consumers most likely to view overdraft products negatively were consumers who did not actually report having used the product. Survey respondents who reported that they used overdraft services were more likely to view overdraft services favorably. Sounds like hating on overdraft products is one of those “luxury beliefs” identified by author Rob Henderson, the Marie Antoinette style, condescending beliefs by more privileged people that appear to be altruistic but when paired with public policy, actually severely damage lower classes. 

It’s time for the CFPB to take a U-turn and cancel this ill-advised plan.