Overdraft Protection Act
Along with many of my Democratic colleagues, I have introduced the Overdraft Protection Act of 2012, H.R. 5691.
Financial institutions have increasingly used overdraft “protection” plans in a way that is deceptive and unfair to consumers, despite a Federal Reserve Rule that required financial institutions to obtain consumers’ consent to opt into overdraft coverage. The problem is significant. The FDIC reports that the vast majority of large banks enroll consumers automatically in overdraft plans, charge an average of $35 per overdraft, and many manipulate the order transactions to post in a way that maximizes overdraft fees to the bank.
A new report by Moebs Services, estimates that banks and credit unions raked in nearly $32 billion in overdraft income in 2011, as fees rise 17% in the last five years. And when individual overdraft fees are calculated in the form of an interest rate, the annualized rate can be as high as 5,000 percent. As the New York Times Editorial Page puts it, there is a vital role to play,
H.R. 5691 will help protect consumers by:
- Requiring overdraft fees to be reasonable and proportional;
- Limiting overdrafts to one per month and 6 per year;
- Codifying the opt-in provisions that the Fed promulgated requiring that consumers opt-in to overdraft coverage;
- Prohibiting institutions from manipulating the order of transactions to maximize overdraft fees; and
- Adding additional disclosures to consumers about overdraft coverage programs
I have introduced overdraft protection legislation in each Congress since 2005. This new legislation differs from those earlier bills by directing the Consumer Financial Protection Bureau to study pre-paid card overdraft programs and limiting the number of overdraft fees a consumer can incur.
By capping the number of overdraft fees the financial institution can charge, rather than placing any new requirements at point-of-sale, we maximize protections to consumers and minimize the impact on retailers during the current recession.
Legislation
05/09/12 - Overdraft Protection Act of 2012 (H.R. 5691)
10/22/09 - Overdraft Protection Act of 2009
Documents/Reports
05/09/12 - Stop the $35 cup of coffee with the Overdraft Protection Act
05/2012 – Overdraft America: Confusion and Concerns about Bank Practices
07/2011 – Checking Account Customers Support Stronger Banking Regulations
04/2011 – Pew Center Report for Safe and Transparent Checking Accounts
10/2009 – Center for Responsible Lending Report: Overdraft Explosion
09/17/09 – Podcast: Sirius Radio Interview on Overdraft Fees
11/2008 – FDIC Study of Bank Overdraft Programs
08/14/08 – Maloney/Frank Comments to Fed/FDIC/OTS on Strengthening Consumer Protections for Overdraft Programs
Links
05/08/12 – NYT Editorial: How Much For That Coffee?
05/04/12 – Overdraft Fees Hit Unsuspecting Consumers
04/29/12 – NYT: Profits Are the Reason for Fees, Not Risk or Costs
04/20/12 – Banks Examined on Overdraft Fees
02/26/12 – NYT Editorial: A Further Look at Overdraft Fees
02/25/12 – NYT Blog: Bucks, Penalty Alert on Overdrafts
11/29/11 – NYT Editorial: Some Thoughts for the Shopping Season
10/07/11 – Revenge of the Gougers
12/26/11 – NYT Editorial: Clearer Bank Account Terms
08/20/09 – NYT Editorial: Debit Card Trap
