WASHINGTON The Senate introduced a bill this afternoon that would bar credit unions and banks from reordering customer payments so as to create the most overdrafts, a practice known as batching.
The bill comes as both credit unions and banks have successfully fought off numerous consumer suits over the batching, mainly because there is no legal prohibition on the practice.
The Brown bill, which comes as overdrafts have become a big profit center for credit unions, would ensure credit unions and banks post transactions in a way that is clear to their customers; give the Consumer Financial Protection Bureau the authority to monitor overdrafting practices; and establish federal guidelines on overdrafts..
“Banks should play by the rules instead of purposefully reordering’ their costumers’ debit card transactions so that they profit while consumers rack up costly penalties,” said Brown.
Joining Brown to help draw attention to his bill was Francis Lesniak, a northeast Ohio woman who overdrew her account by a total of only $5.60, but was charged $96 in penalties because her transactions were reordered.
Consumers who have sued credit unions and banks claim their latest payments on debit card bills are not used to pay off the oldest bills first, but sometimes collected in batches to pay off the biggest bills first, leading to overdraft charges on the oldest bills. The average overdraft fee nationwide is now $34, giving rise to the notion of the $34 cup of coffee.
Credit unions were hit with almost a dozen suits a year ago, but most of the complaints were dismissed. But several banks have agreed to pay million dollar settlements on the overdraft claims.
