Financial Institutions Subcommittee Chair Targets Hidden Overdraft Fees

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 ( The updated version of the Consumer Overdraft Protection Fair Practices Act would give bank customers more control over and information about overdraft protections.

The legislation, which is co-sponsored by House Financial Services Committee Chairman Barney Frank (MA-4) and Rep. Julia Carson (IN-7), includes provisions specifically to address the rapid increase of hidden overdraft fees associated with debit card purchases. Maloney said that she intends to examine this issue further by holding subcommittee hearings about this issue in the coming months.

“I support the general concept of overdraft loans and fees – banks have the right to make money for what can be a valuable service. However, I do not support withholding information from customers about their accounts and their money,” said Maloney. “Fairness is an essential component to a safe and sound banking system.

“The Financial Institutions Subcommittee will take a look at this issue to determine how to make overdraft protections as fair and useful as possible. I look forward to receiving input from consumer groups, regulators and the banks as we go forward.”

Customers are often automatically enrolled in overdraft protection services without notification and are often given no alert when they are on the verge of overdrawing. As a result, they have to pay back overdraft loans that they may not have wanted, and interest on those loans accrues until enough money is deposited into their accounts. The Center for Responsible Lending has estimated that consumers pay between $10.3 billion and $22.7 billion a year in overdraft loan fees.

Maloney’s legislation would equip bank customers with more control and information about overdraft protection fees and would alert them if they are on the verge of overdrawing.

Included in the legislation are provisions that would:

  • ensure that consumers opt-in to overdraft protections, rather than being enrolled into them without notification;
  • require that consumers are alerted if they are about to overdraw from their accounts at ATMs;
  • require that consumers are alerted at points-of-sale if they are about to overdraw from their accounts when using debit cards; and
  • require that banks provide full, written disclosure of their overdraft policies to customers. 


Last month, Maloney cited a new Center for Responsible Lending report on increasing overdraft fees stemming from debit card transactions as more evidence of the need for overdraft legislation.

Maloney first introduced overdraft legislation (H.R. 3449) in 2005.