Maloney Joins with Consumer Advocates to Introduce Overdraft Protection Act of 2021
WASHINGTON, DC — Congresswoman Carolyn B. Maloney (D-NY), senior member of the House Financial Services Committee and author of the Credit CARD Act, today joined with consumer protection advocates to announce the introduction of the Overdraft Protection Act of 2021. This bill will crack down on predatory overdraft fees and would establish fair and transparent practices for overdraft coverage programs. Rep. Maloney has introduced a version of this legislation since 2009.
“Overdraft fees are predatory and hit hardest those who can least afford them — cash-strapped hardworking Americans and college students who are struggling to pay their bills, keep a roof over their heads, and food on the table,” said Rep. Maloney. “Making matters worse, even during the pandemic – when our country and the world was in the throes of both health and economic crises, banks charged billions of dollars in overdraft fees. The Consumer Financial Protection Bureau found that the average consumer pays a 17,000 percent interest rate by overdrafting their account. It’s not right for a $10 sandwich at a bodega to cost nearly $50 because of a $35 overdraft charge – the Overdraft Protection Act stops this.”
“Consumer Action supports the Overdraft Protection Act of 2021, which among other important provisions would limit the number of overdraft fees banks can charge to one per month and no more than six per year and end overdraft fees based solely on debit ‘holds’ still in process,” said Linda Sherry, Director of National Priorities for Consumer Action. “And, by requiring that bank customers be informed about alternative (and less costly) overdraft programs, consumers will have the opportunity to learn about savings-account and credit-based overdraft protection plans that can truly protect them from predatory overdraft fees.”
"Rep. Maloney's important bill will help return overdraft fees to their roots as the cost of an occasional courtesy covering a check that would otherwise bounce, rather than a back-end way of gouging the most vulnerable consumers with high-cost, deceptive credit,” said Lauren Saunders, Associate Director for the National Consumer Law Center.
“Abusive overdraft fee practices exacerbate poverty. Overdraft fees disproportionately affect low-income people of color – pushing them out of the banking system and making it difficult to participate in e-commerce. Rep. Maloney's Overdraft Protection Act makes critical reforms to make overdraft coverage fair and transparent for low-income consumers,” said Alpha Taylor, Staff Attorney for the National Consumer Law Center.
“One overdraft fee can throw a family into financial disarray, and as they add up, they can snowball into a financial crisis. They hit working people living paycheck to paycheck and communities of color especially hard, stripping hard-earned dollars away from those who can least afford to lose them,” said Rob Randhava, Senior Policy Counsel at The Leadership Conference on Civil and Human Rights. “We want to get more people into the mainstream banking system, but we need fair, transparent rules in order to keep them there.”
"Banks earn billions in profits from excessive overdraft fees at the expense of cash-strapped workers who are already struggling to provide for their families and make ends meet," said Syed Ejaz, Financial Policy Analyst for Consumer Reports. "This bill will help protect consumers by curbing deceptive marketing practices banks use to sign customers up for so-called overdraft protection programs and set important limits on how often fees can be charged."
“Even after public outcry over the years, big banks have made it common practice to charge about $35 for overdraft fees, sometimes three to six times a day. That can add up to more than $200 in just one day,” said Mike Litt, U.S. PIRG’s consumer campaign director. “Financial institutions continue to rake in tens of billions of dollars a year from these overly punitive fees, which mostly penalize customers with the least money to lose. The Overdraft Protection Act would provide consumers needed relief from these unfair charges. It’s been more than ten years since Congresswoman Maloney first introduced this bill. Now, U.S. PIRG is calling on the rest of Congress to sign on. This bill will help Americans in every district across the country and consumers simply can’t afford to wait any longer.”
“Now more than ever, banks and regulators are touting the need for financial inclusion,” said Ashley Harrington, Director of Federal Advocacy for the Center for Responsible Lending. “But there is an elephant in the room, and it’s the cycle of exclusion perpetuated by overdraft fees. These fees make banks -- the very institutions we trust to safeguard our funds -- a hostile place for many of our nation’s most vulnerable financial households to put their money.”
"Americans for Financial Reform applauds Rep. Carolyn Maloney for this important piece of legislation to protect consumers from exorbitant overdraft fees, which only enrich banks and penalize already financially distressed Americans,” said Rion Dennis, Legislative and Advocacy Director for Americans for Financial Reform. “Overdrafts fees are just another form of high cost lending, which consumers have to pay back along with the punitive fee when by definition they are having problems making ends meet."
“On behalf of financially beleaguered Americans, we thank Congresswoman Maloney for championing the fight to end these egregious ‘gotcha fees,’ which disproportionately burden low- and moderate-income consumers and cost them billions of dollars each year,” said Jack Gillis, Executive Director for the Consumer Federation of America.
Endorsing organizations include Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Reports, National Consumer Law Center (on behalf of its low-income clients), U.S. PIRG, The Leadership Conference on Civil and Human Rights, and Consumer Federation of America.
Cosponsors of the bill include Reps. André Carson (D-IN), David Cicilline (D-RI), Steve Cohen (D-TN), Danny K. Davis (D-IL), Bill Foster (D-IL), Jesús G. “Chuy” Garcia (D-IL), Sylvia Garcia (D-TX), Raúl Grijalva (D-AZ), Jahana Hayes (D-CT), Ro Khanna (D-CA), Al Lawson (D-FL), Stephen Lynch (D-MA), Jim McGovern (D-MA), Gwen Moore (D-WI), Marie Newman (D-IL), Eleanor Holmes Norton (D-DC), Donald Payne, Jr. (D-NJ), Jamie Raskin (D-MD), Kathleen Rice (D-NY), Bobby L. Rush (D-IL), Michael San Nicolas (D-GU), Jan Schakowsky (D-IL), Brad Sherman (D-CA), Albio Sires (D-NJ), Thomas R. Suozzi (D-NY), Mark Takano (D-CA), Rashida Tlaib (D-MI), Ritchie Torres (D-NY), David Trone (D-MD), and Nydia Velázquez (D-NY).
The Overdraft Protection Act of 2021 would:
- require that fees be “reasonable and proportional” to the cost of processing these transactions and the amount of the overdraft;
- prevent institutions from re-ordering transactions to artificially increase their fees;
- limit the number of fees they can charge to 1 per month and 6 per year;
- empower consumers by requiring that they proactively opt-in to overdraft programs in the first place – rather than automatically being enrolled;
- improve transparency and disclosures; and
- prohibit charging overdraft fees for “debit holds” that exceed actual transaction amounts, among other strong measures.
According to an S&P Global Market Intelligence article from earlier this year, large banks collected $8.8 billion dollars in overdraft fees alone and reported more than $147 billion dollars in net income in 2020.
The Overdraft Protection Act builds on the progress made under Congresswoman Maloney’s Credit CARD Act of 2009 which saves consumers roughly $12 billion per year. A 2015 CFPB study estimated that this legislation saved consumers $16 billion dollars in the first years of its enactment.
A recording of the event can be found here.