Introduction of the Overdraft Protection Act of 2013by Representative Carolyn B. Maloney
Posted on 2013-03-19
of new york
in the house of representatives
Tuesday, March 19, 2013
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I rise to introduce
the Overdraft Protection Act of 2013.
With the rise of debit cards and the constant presence of swipe terminals to use those cards to pay for everything from dry cleaning to gas to candy bars, it's easier than ever for consumers to overdraw their checking accounts and incur overdraft fees.
That's how a cappuccino can become a $35 cappuccino faster than you can say ``overdrawn''. Some institutions have responded to consumer outrage over these fees by implementing a policy of denying debit card transactions that would overdraw an account and I applaud them.
But too many financial institutions don't make consumers adequately aware of the perils of overdrafts, and others reorder the posting of transactions in a way that maximizes their fees.
Although the Federal Reserve issued a rule requiring institutions to obtain affirmative consent from consumers to opt into overdraft coverage two years ago, it is quite clear more needs to be done to help consumers avoid multiple overdrafts.
A survey released last year by Pew Charitable Trusts highlights the need for the bill I am introducing today.
More than one-third of those surveyed--people who had overdrawn their accounts in the past year--didn't know they had overdraft coverage until they incurred a penalty fee, and more than half of people did not believe they had opted in. The Pew study also found that most of the people who overdraft their accounts do so more than once.
[[Page E336]] According to Moebs Services, overdraft fees brought in over $31.5 billion dollars in revenue to financial institutions in 2012.
As a result of the Federal Reserve's opt-in requirement the number of overdrafts has fallen, but some institutions have responded to the drop by increasing the price of overdraft fees and continuing to intentionally manipulate the transactions' posting order in a way that maximizes the fees they can earn from this service.
My bill increases disclosure to consumers, limits the fees' price and frequency, and bans the manipulation of transactions.
Specifically, the Overdraft Protection Act will: require consumer consent before banks can permit overdraft fees to paper checks, automated charges and debit card swipe-terminal transactions; require that fees be ``reasonable and proportional'' to the amount of the overdraft; cap the number of fees that can be charged at one per month and six per year; prohibit banks from manipulating the sequence in which checks and other debits are posted if it causes more overdrafts and maximizes fees paid to banks; require that consumers be warned at ATMs if their withdrawals will trigger an overdraft; require the CFPB to study the practices of pre-paid cards and if necessary extend these provisions to those products.
The Overdraft Protection Act will ensure consumers are protected from misleading practices and I urge my colleagues to support this important legislation.