Starting January 1, a new California law, Assembly Bill 2017, will eliminate overdraft fees at state-regulated banks. The legislation aims to protect consumers from incurring charges when transactions, such as ATM withdrawals, are declined due to insufficient funds.
The bill’s authors emphasized its goal of curbing financial burdens caused by so-called “junk fees.” Senator Ana Caballero (D-14) explained that the law is intended to shield financially vulnerable consumers, stating, “AB 2017 will reign in junk fees and protect consumers from charges they can’t afford.”
Tim Grayson (D-9), who authored the bill, criticized the fees as unnecessary, saying, “Consumers receive no service at all in exchange for the fee, and the fees themselves, which average $34, do not represent the marginal costs to institutions for declining the transaction.”
The bill was backed by consumer advocacy organizations such as the California Low-Income Consumer Coalition and East Bay Community Law Center. While initially opposed, the California Credit Union League ultimately adopted a neutral stance. Governor Gavin Newsom signed the bill into law in September.
Overdraft and non-sufficient fund (NSF) fees have been a significant source of revenue for banks. In 2023, U.S. banks collected $5.8 billion in such fees, according to the Consumer Financial Protection Bureau—down 24% from the previous year, reflecting a growing pushback against these charges.
Under AB 2017, state-regulated banks and credit unions will no longer be able to charge NSF fees when a transaction is declined immediately. Advocates of the law argue that these fees unfairly penalize consumers without providing any real service.
While the law marks progress for consumer protections, some customers remain skeptical, anticipating that banks may introduce new fees to offset lost revenue.
“Things happen especially in this economy, and it’s $35 and then if some other check bounces, it’s another $35,” said Marie of San Jose.
