Representative Maloney Reintroduces Overdraft Protection Law

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U.S. Representative Carolyn Maloney (D-NY) this week reintroduced legislation to crack down on abusive overdraft fees.

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Maloney’s bill, the Overdraft Protection Act of 2021, would establish fair and transparent practices for overdraft hedging programs.

Concretely, the Overdraft Protection Act of 2021 would require that the fees be “reasonable and proportional” to the cost of processing these transactions and the amount of the overdraft. In addition, it would prevent institutions from reordering transactions to artificially increase their fees. Also, it would limit the number of fees they can charge to 1 per month and 6 per year. In addition, it would require consumers to first choose to participate in overdraft programs rather than being automatically enrolled in them.

Finally, it seeks to improve transparency and disclosure, and to prohibit the charging of overdraft fees for “debit deductions” that exceed actual transaction amounts.

“Overdraft fees are predatory and hit hardest those who can least afford it – cash-strapped Americans and students who work hard and struggle to pay their bills, keep a roof over their heads. over their heads and food on the table, ”Maloney said. “To make matters worse, even during the pandemic – when our country and the world was in the throes of both health and economic crises, banks charged billions of dollars in overdraft fees. The Consumer Financial Protection Bureau has found that the average consumer pays an interest rate of 17,000% by overdrafting their account.

According to a report by S&P Global Market Intelligence, the big banks alone collected $ 8.8 billion in overdraft fees and reported more than $ 147 billion in net profit in 2020.

The legislation has been approved by several organizations, including Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Reports, National Consumer Law Center, US PIRG, The Leadership Conference on Civil and Human Rights, and Consumer Federation of America.

“Even after the public outcry over the years, it was common practice for the big banks to charge around $ 35 for overdraft fees, sometimes three to six times a day. It can be over $ 200 in a single day, ”said Mike Litt, US PIRG Consumer Campaign Director. “Financial institutions continue to collect tens of billions of dollars a year from these overly punitive fees, which mainly penalize customers with the least money to lose. The Overdraft Protection Act would provide consumers with relief from these unfair charges. “

The Consumer Bankers Association has expressed opposition to the bill.

“Many customers who choose to participate in an overdraft program see it as a valuable service that allows them to shop for daily necessities. Restricting access to overdrafts, as this law provides, would only lead consumers to predatory payday lenders or pawn shops – which do not offer the same security or soundness as well-regulated and well-regulated banks. supervised, ”said Richard Hunt, CBA President and CEO.


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