Overdraft

Along with many of her Democratic colleagues, Congresswoman Maloney has introduced the Overdraft Protection Act.

Financial institutions have increasingly used overdraft “protection” plans in a way that is deceptive and unfair to consumers, despite a Federal Reserve Rule that requires financial institutions to obtain consumers’ consent to opt into overdraft coverage. This problem is significant. The FDIC reports that the vast majority of large banks enroll consumers automatically in overdraft plans, charge an average of $35 per overdraft, and manipulate the order transactions to post in a way that maximizes overdraft.

 A report by the Consumer Financial Protection Bureau (CFPB) released in July 2014 raises concerns about the impact of opting into overdraft services for debit card and ATM transactions. The study found that the majority of debit card overdraft fees are incurred on transactions of $24 or less, and that the majority of overdrafts are repaid within three days. Put in lending terms, if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate (APR).

The Overdraft Protection Act will help protect consumers by:

  • Requiring overdraft fees to be reasonable and proportional

  • Limiting overdrafts to one per month and six per year

  • Codifying the opt-in provisions that the Fed promulgated, requiring that consumers opt-in to overdraft coverage

  • Prohibiting institutions from manipulating the order of transactions to maximize overdraft fees

  • Adding additional disclosures to consumers about overdraft coverage programs

 Congresswoman Maloney has introduced overdraft protection legislation in each Congress since 2005. This new legislation differs from those earlier bills by directing the Consumer Financial Protection Bureau to study pre-paid card overdraft programs and to limit the number of overdraft fees a consumer can incur.

By capping the number of overdraft fees a financial institution can charge, rather than placing any new requirements at point-of-sale, we simultaneously maximize protections to consumers and minimize the negative impact on retailers.

More on Overdraft

May 3, 2018 Newsletter

Dear Friend,

Today, not surprisingly, there are more controversies flying out of the Trump White House over the Russia investigation. And while I’m appalled by this news and working to hold this Administration accountable for its abuses, I believe we can’t ignore the damage being done by the President to essential consumer protections that we put in place after the 2008 financial crisis.

Sep 10, 2014 Press Release

WASHINGTON – Congresswoman Carolyn B. Maloney (D-NY) today urged Consumer Financial Protection Bureau Director Richard Cordray to act immediately to curb abusive overdraft fees. Maloney, who authored the Credit Card Accountability Responsibility and Disclosure Act of 2009, says the CFPB has the authority to limit overdraft fees charged to bank accounts in the same way her bill limited similar fees on credit card transactions. The Congresswoman called for two specific actions by the CFPB: a limit on overdraft fees and expanded opt-in requirements.

Jul 31, 2014 Press Release

WASHINGTON – Congresswoman Carolyn B. Maloney (D-NY) is calling for the House to consider legislation she introduced to end abusive overdraft fees after a new report from the Consumer Financial Protection Bureau found that, in lending terms, certain overdraft fees are tantamount to a 17,000 percent annual percentage rate (APR).

Mar 12, 2009 Press Release

WASHINGTON, DC – With the growth in the use of debit cards for everyday purchases, it’s become much easier to overdraw a checking account. When that happens, it often incurs an overdraft fee—because most banks offer or require “overdraft protection”—and you don’t know it until you get your bank statement or happen to check your balance. What’s more, multiple overdraft fees can be incurred based on what sequence the transactions are posted to a consumer’s account.

Rep. Carolyn Maloney (D-NY), senior member of the House Financial Services Committee, along with Reps.Gary Ackerman, Brad Miller, Keith Ellison, Jackie Speier, John Tierney and Anna Eshoo as cosponsors, today introduced the “Consumer Overdraft Protection Fair Practices Act” (H.R. 1456) which would require notice to customers at the ATM or point-of-sale terminal when a purchase is about to trigger an overdraft—and would give consumers at the transaction point a choice of whether to accept or reject the overdraft service and the associated fee. 

Feb 9, 2007 Press Release
WASHINGTON, DC – Rep. Carolyn Maloney (NY-14), Chair of the House Financial Institutions Subcommittee, has reintroduced legislation (H.R. 946) intended to rein in the billions of dollars each year that bank customers are paying in hidden overdraft loan fees (http://maloney.house.gov/documents/financial/consumer/20070208OverdraftBill.pdf). The updated version of the Consumer Overdraft Protection Fair Practices Act would give bank customers more control over and information about overdraft protections.