Maloney On Push To End High Overdraft Fees with NY1's Tara Lynn Wagner
Rep. Carolyn Maloney is pushing for legislation that would change how banks levy overdraft fees. NY1’s Tara Lynn Wagner talks with the congresswoman about the fees in her Money Matters report.
Ever pay $35 for a cup of coffee? You might have if you tried to pay for it when you there wasn't enough money in your bank account. It's called an overdraft fee and it will cost you big time: an average of $34 dollars according to the Consumer Financial Protection Bureau.
"Overdraft fees are going up and they continue to go up and in some cases they are unfair and abusive,” said Rep. Carolyn Maloney, who represents parts of Manhattan, Queens and the Bronx.
Maloney has been pushing for legislation that would curb when and how banks can levy these type of fees.
For one thing, the CFPB found that most of the overdraft fees applied to debit card purchases were on transactions totaling $24 or less. And since they say most people repay that money within three days, Maloney says charging a fee of $35 on a three-day loan of $24 bucks is like having an APR of 17,000 percent. She's calling for fees to be fair and proportional to the charge.
"If you are overdrafting for $10, you don't do an overdraft fee that is $35 on average,” said Maloney.
She also wants to see the opt-in requirement expanded to paper checks and automatic payments. Right now it only applies to ATM and debit purchases.
Finally, she wants to prohibit banks from a practice she calls "shuffling" the bills, paying larger transactions first, which causes multiple smaller transactions to go into overdraft, incurring multiple overdraft fees.
"Why in the world should a financial institution be able to pull out a very high mortgage payment or car payment or rent payment and put that bill in before $24 purchases and then throw you immediately into an overdraft position?" said Maloney.
As the author of the CARD Act which instituted sweeping changes across the credit card industry, Maloney knows this is an uphill battle, especially since banks make billion off of these fees every year.
"Change is very hard and people will fight it, particularly if they are making a profit off of it. But it's the fair and right thing to do,” said Maloney.