The House Financial Services Committee passed a bill restricting the number of overdraft charges banks can issue, legislation that has drawn the ire of community bankers.
Sponsored by Rep. Carolyn Maloney (D-N.Y.), the bill passed the committee on a 27-22 vote. It 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.
As reported by American Banker, it is unknown whether Senate lawmakers will take up the bill. Earlier this month, Sens. Cory Booker (D-N.J.) and Elizabeth Warren (D-Mass.) rallied with Maloney outside the Capitol in support. Booker and Warren have co-sponsored a separate overdraft bill that would ban overdraft fees on debit card transactions and ATM withdrawals, and limit fees placed for checks and recurring payments.
In introducing the bill, Maloney said financial institutions are aggressively encouraging consumers to consent to the most expensive overdraft option, where a high flat fee is collected for individual transactions.
“Such abusive practices in connection with overdraft coverage fees have deprived consumers of meaningful options and placed significant financial burdens on low- and moderate-income consumers,” the bill states. “African-Americans and Latinos are disproportionately harmed by overdraft coverage fees and more likely to pay multiple overdraft coverage fees annually.”
Following the vote, Consumer Bankers Association President and CEO Lindsey Johnson criticized the bill, saying it would “harm vulnerable consumers in need of emergency financing — making it more difficult to cover unexpected expenses between paychecks. This outdated legislation disregards years of bank-led, consumer-driven innovation and will take away a financial safety net many families count on in times of need.”
The ABA and ICBA have also spoken against the current set of overdraft reforms. The ABA noted in June that 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 share.