Bill would require clear disclosure of overdraft coverage and fees
SEATTLE -- Some members of Congress believe you need protection from overdraft protection plans. The "Overdraft Protection Act" introduced Wednesday would require a customer's affirmative opt-in to overdraft plans and require clear disclosure of the coverage and fees.
If approved, the bill would also require that overdraft fees be "reasonable and proportional" to the cost of the transaction. It would limit the quantity of fees that can be charged to one per month and six per year.
And it would ban banks from manipulating the order transactions are posted to maximize overdraft fees.
At a news conference on Capitol Hill Wednesday, the author of the bill, Rep. Carolyn Maloney a Democrat from New York, explained why she believes Congress should act.
"With the rise of debit cards and the constant presence of swipe terminals to use those cards to pay for everything from a tank of gas to a cup of coffee to a candy bar, it's easier than ever for a consumer to overdraw their checking account and incur an overdraft fee," Maloney said.
That’s why the bill also expands the opt-in requirement to paper checks, ATMs, and recurring monthly payments.
Consumer groups support the Overdraft Protection Act.
"Overdraft protection can work against consumers when banks use tricks and traps to make it easy for consumers to trigger their overdraft or when banks engage in confusing marketing for expensive overdraft programs," said Pam Banks with Consumers Union. "This bill is an attempt to curb some of those abuses."
But the banking industry opposes the Overdraft Protection Act. The American Bankers Association calls it "harmful legislative proposal,
which would hurt financial institutions and their customers."
As I reported Tuesday, many people who have overdraft coverage for point-of-purchase debit card transactions and ATM withdrawals don't know they signed up for their service from their bank. If they're about to overdraw, the transaction will be approved and they'll get hit with a $35 fee.
A survey by Pew Charitable Trusts shows most people would prefer the transaction is declined rather than pay the overdraft fee.
Pew's Susan Weinstock says the provisions in the bill would insure people make an informed decision about how their checking account.
"Pew's research shows that there's rampant consumer confusion about overdraft and we think this bill takes a lot of really important steps in clearing up a lot of that confusion," she said.
For now, you're on your own. You should contact your bank and see how your account is set up.
Ask them specifically: "What happens if I'm about to overdraw. Will there be a fee?" And ask about cheaper options, such as linking your checking account to your savings account.
Remember, you can change your choice at any time.
If approved, the bill would also require that overdraft fees be "reasonable and proportional" to the cost of the transaction. It would limit the quantity of fees that can be charged to one per month and six per year.
And it would ban banks from manipulating the order transactions are posted to maximize overdraft fees.
At a news conference on Capitol Hill Wednesday, the author of the bill, Rep. Carolyn Maloney a Democrat from New York, explained why she believes Congress should act.
"With the rise of debit cards and the constant presence of swipe terminals to use those cards to pay for everything from a tank of gas to a cup of coffee to a candy bar, it's easier than ever for a consumer to overdraw their checking account and incur an overdraft fee," Maloney said.
That’s why the bill also expands the opt-in requirement to paper checks, ATMs, and recurring monthly payments.
Consumer groups support the Overdraft Protection Act.
"Overdraft protection can work against consumers when banks use tricks and traps to make it easy for consumers to trigger their overdraft or when banks engage in confusing marketing for expensive overdraft programs," said Pam Banks with Consumers Union. "This bill is an attempt to curb some of those abuses."
But the banking industry opposes the Overdraft Protection Act. The American Bankers Association calls it "harmful legislative proposal,
which would hurt financial institutions and their customers."
As I reported Tuesday, many people who have overdraft coverage for point-of-purchase debit card transactions and ATM withdrawals don't know they signed up for their service from their bank. If they're about to overdraw, the transaction will be approved and they'll get hit with a $35 fee.
A survey by Pew Charitable Trusts shows most people would prefer the transaction is declined rather than pay the overdraft fee.
Pew's Susan Weinstock says the provisions in the bill would insure people make an informed decision about how their checking account.
"Pew's research shows that there's rampant consumer confusion about overdraft and we think this bill takes a lot of really important steps in clearing up a lot of that confusion," she said.
For now, you're on your own. You should contact your bank and see how your account is set up.
Ask them specifically: "What happens if I'm about to overdraw. Will there be a fee?" And ask about cheaper options, such as linking your checking account to your savings account.
Remember, you can change your choice at any time.
