The American Bankers Association and Consumer Bankers Association reiterated their opposition to overdraft reforms under the Overdraft Protection Act on June 13 as the House Financial Services Committee is expected to review the bill this week.
The bill, sponsored by Rep. Carolyn Maloney (D-N.Y.) would amend the Truth in Lending Act and prohibit banks from charging customers multiple overdraft fees in a month and more than six in a year, regardless of whether a customer opts in. The bill would direct the Consumer Financial Protection Bureau to study pre-paid card overdraft programs.
According to the ABA, the Overdraft Protection Act “would prevent important payments from being paid, deny customers access to liquidity during challenging times and cause customers to incur additional fees and inconveniences.”
In a statement posted June 13, CBA President and CEO Richard Hunt said lower-income consumers use overdraft services to cover emergency expenses. “Without access to viable, bank-offered short-term liquidity products like overdraft, consumers will be left with little recourse but to use less-supervised, less-regulated, non-depository institutions to meet their needs — an undesirable position to place vulnerable consumers,” he said.
According to the ABA, banks already offer consumers many account options, many of which do not include overdraft protection. This includes Bank On-certified accounts which are offered by financial institutions representing 56 percent of the deposit market. The bill would overturn a 2009 framework requiring customers to opt-in for overdraft protection for one-time debit card purchases and ATM transactions, the association said.
Maloney, who has introduced overdraft protection legislation in each Congress since 2005, alleged that financial institutions “have increasingly used overdraft ‘protection’ plans in a way that is deceptive and unfair to consumers, despite a Federal Reserve Rule that requires financial institutions to obtain consumers’ consent to opt into overdraft protection.”
Last month, ABA voiced opposition to legislation introduced by U.S. Sens. Cory Booker (D-N.J.) and Elizabeth Warren (D-Mass.). The Stop Overdraft Profiteering Act would ban overdraft fees on debit card transactions and ATM withdrawals, and limit fees placed for checks and recurring payments.
U.S. consumers have expressed support for overdraft services: Nearly 90 percent said they were pleased with their bank and found overdraft protection valuable, according to a Morning Consult study undertaken on behalf of the ABA earlier this year. Three in four who had paid an overdraft fee in the past year were glad their bank had covered that payment, rather than declining or returning it.
Many of the largest U.S. banks have already significantly changed or altogether ended their overdraft fees as political pressure mounts to do so.