Senate Dems propose new crackdown on overdraft fees
WASHINGTON — Two Democratic senators are introducing a bill that would ban overdraft fees on debit card transactions and ATM withdrawals.
The bill, sponsored by Sens. Cory Booker, D-N.J., and Sherrod Brown, D-Ohio, would also require banks to post transactions in a manner that minimizes overdraft and insufficient fund fees.
“Overdraft fees are a tax on paychecks already stretched thin,” Brown, the top Democrat on the Senate Banking Committee, said in a press release. “This bill keeps hardworking Americans’ money in their pockets and stops big banks from slapping big fees on customers for small overdraft amounts.”
In 2010, the Federal Reserve required that consumers affirmatively opt in to overdraft services. But the senators cited a Pew Charitable Trusts study that said 52% of people who overdrew their checking accounts and paid a fee in the past year could not recall consenting to the service.
In addition to prohibiting overdraft fees on debit card and ATM withdrawals, the bill would also stop banks from charging more than one overdraft fee per month and no more than six overdraft fees in any single calendar year for check and recurring-bill-payment overdrafts.
The bill would also mandate a three-day waiting period between when an individual opens a new account and when a financial institution may offer overdraft protection.
“These fees generate enormous amounts of revenue for the banks while most customers don’t even know they’ve opted into such charges,” Booker said. “Worse yet, 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.”
But some banking groups say consumers are sufficiently aware of the overdraft fee process.
"Overdraft protection is optional and requires the consumer to proactively opt-in,” said Richard Hunt, chief executive officer of the Consumer Bankers Association, in a statement. “According to research, customers using the service reported a clear understanding of the process.”