Democratic Senators Push Overdraft Bill
CUs contend the bill, which would limit overdraft fees charged by CUs and banks, is not needed.
Two key Senate Democrats are pushing a plan that would limit overdraft fees at credit unions and banks – legislation that credit unions contend is not needed.
The bill, sponsored by Senate Banking ranking Democrats Sherrod Brown of Ohio and Sen. Cory Booker (D-N.J.), would prohibit overdraft fees on debit cards and ATM withdrawals. It would also prohibit institutions from charging more than one overdraft fee each month and no more than six fees a year for check and recurring bill payments.
It also would limit check and recurring bill payment fees to an amount that is reasonable and proportional to the financial institution’s costs.
“These fees are a tax on paychecks that are already stretched thin,” Brown said. “Banks should be set up to serve customers – not scam them to pad their CEOs’ bottom lines.”
“Overdraft fees fall on those least likely to be able to afford them – individuals for whom a $35 overdraft charge could push them over the brink into financial ruin,” Booker said. “Our bill would end these unfair practices many banks use that leave some consumers – especially those that are the most vulnerable – trapped in a vicious cycle of poverty.”
Since Republicans control Capitol Hill, it is unlikely that the legislation will become law during the current Congress. But if Democrats take control following the November mid-term elections, Brown may become Senate Banking Chair and the legislation could become a high priority.
The CFPB, under former Director Richard Cordray, had said it planned to regulate overdraft fees and issued model disclosures on them.
A CFPB study found people who frequently try to overdraw their checking accounts typically pay almost $450 more in fees if they opted into debit card and ATM overdraft coverage.
However, when he took office, Acting CFPB Director Mick Mulvaney placed the issue on the agency’s “inactive” list of possible rulemakings.
That appears to be fine with credit union trade groups, who have questioned the need for overdraft rules at credit unions.
“We are highly skeptical that any legislation on this topic is necessary,” CUNA Chief Advocacy Officer Ryan Donovan said. He added that credit unions offer overdraft protection as a convenience. He also said CFPB data indicate consumers remain pleased with their overdraft products, adding that the agency has received few complaints about them.
NAFCU EVP of Government Affairs and General Counsel Carrie Hunt said before credit unions offer the overdraft service, members must knowingly request the service.
“Credit unions actively seek ways to provide their members with needed products and services, and overdraft protections are one option consumers may choose from to help meet their needs,” she said.