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

Aug 5, 2021 In The News

As Democrats work to eradicate overdraft fees, some banks are retooling their overdraft policies or eliminating the fees altogether on their own, moves that could help lower-income Americans save money.

Aug 2, 2021 In The News

Pressure continues to build over dreaded bank overdraft fees. Alliant is eliminating both overdraft and non-sufficient fund fees effective Monday, CNN Business has learned.

Jul 12, 2021 In The News

A pair of congressional hearings on Capitol Hill in May served as a perfect setting for Democrats and Republicans to take shots at Wall Street’s most powerful bank CEOs.

While some Republicans focused their questioning around voting rights and "woke-ism," several Democrats took aim at the overdraft fee — a charge financial institutions levy on their customers when they overdraw their accounts. 

Jul 9, 2021 In The News

Queens Rep. Carolyn B. Maloney joined advocates in front of Wells Fargo on Madison on Friday to call on Congress to pass legislation to keep overdraft fee practices in check.

The Overdraft Protection Act of 2021, introduced by Maloney last week, would improve the transparency of overdraft programs for consumers.

Jul 9, 2021 In The News

U.S. Congresswoman Carolyn B. Maloney (D-12) leads a press conference to discuss her Overdraft Protection Act of 2021.

U.S. Congresswoman Carolyn B. Maloney (D-12) leads a press conference to discuss her Overdraft Protection Act of 2021.

Jun 30, 2021 In The News

A senior House Democrat is reviving her campaign to crack down on overdraft fees with legislation introduced on Wednesday that would impose limits on the size and frequency of such charges at financial institutions.

Flanked by consumer advocates, Rep. Carolyn Maloney, D-N.Y., unveiled the latest version of her Overdraft Protection Act at a Washington, D.C., press conference, saying the banking industry hasn't done a good enough job of reining in "manipulative and predatory" practices like reordering transactions to maximize overdraft fees.

Jun 30, 2021 In The News

WASHINGTON — In the latest example of pressure on banks to rein in overdraft fees, a senior House Democrat has reintroduced legislation to restrict the charges.

Rep. Carolyn Maloney, D-N.Y., held a press conference Wednesday to tout the Overdraft Protection Act, which would restrict the number of times banks can collect the fees and is also intended to ensure that charges are reasonable.

“The Overdraft Protection Act will keep money in people's pockets,” Maloney said.

Jun 30, 2021 In The News

Democrats are once again taking aim at dreaded bank overdraft fees.

New York Congresswoman Carolyn Maloney reintroduced legislation on Wednesday that would crack down on overdraft fees, making it illegal for banks to charge more than one fee per month.

Jun 24, 2021 In The News

Rep. Carolyn Maloney, D-NY, said Wednesday she plans to introduce her Overdraft Protection Act next week. She has introduced the bill in every Congress since 2009, but has yet to see it pass. 

This session will be different, the congresswoman said, adding she is confident her bill, which would force more transparency on predatory overdraft practices, will make it to President Joe Biden’s desk.

Jun 17, 2021 In The News

New York Democrats want JPMorgan Chase to return the overdraft fees the bank collected during the pandemic — and to scrap the hated charges altogether.