Congressional Action on Overdraft Changes Heats Up
A second bill to regulate financial institutions' overdraft practices was scheduled to be introduced to the U.S. Senate the week of July 22 by Sen. Sherrod Brown, D–Ohio. Action on overdraft practices has increased since the CFPB released its study of overdraft programs which found that “overdraft programs can be costly for the consumers who use them, and that both consumer outcomes and policies related to overdraft programs can vary considerably.”
The first bill, H.R. 1261, was introduced by U.S. Rep. Carolyn Maloney, D-N.Y., H.R. 1261 would:
- Require overdraft fees to be reasonable and proportional
- Limit overdraft to one per month and six per year
- Codify the opt-in provisions that the Fed promulgated requiring that consumers opt-in to overdraft coverage
- Prohibit institutions from manipulating the order of transactions to maximize overdraft fees
- Add additional disclosures to consumers about overdraft coverage programs
Brown’s bill which is still being finalized, would:
- Empower the CFPB to monitor financial institutions overdraft practices
- Require the CFPB to establish fair guidelines to protect consumers
- Require financial institutions to post transactions and communicate process in an easy to understand format
- Provide safe harbor for financial institutions that follow CFPB overdraft guidelines.
This congressional activity could seriously impact overdraft programs offered by credit unions throughout the country. The MCUL will continue to monitor these bills and will communicate further information to credit unions once available.
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. Bryan Laviolette is the editor of Monitor. Contact him by email
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