House Democrats, led by Rep. Carolyn Maloney, D-N.Y., are renewing efforts to rein in overdraft fees charged by financial institutions.
Maloney, who was joined by 31 Democratic colleagues in introducing H.R. 4277, has introduced similar legislation each Congress 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,” she said last week.
She added, “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.”
The legislation would require that overdraft fees be “reasonable and proportional” to the cost of processing the transactions and the amount of the overdraft. The legislation also would limit the number of fees financial institutions can charge to one per month and six per year and give consumers the power to decide whether to opt-into overdraft programs.
Consumer groups praised Maloney and the Democrats. “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,” said Rion Dennis, legislative and advocacy director for Americans for Financial Reform.
The National Credit Union Administration board has been struggling with the overdraft issue for the past several months. The board approved a proposed rule in January that would require credit unions to establish specific time limits for members to either deposit funds or obtain a loan to cover each overdraft. Currently, the NCUA rules prescribe a 45-day time limit for members to solve overdraft problems.
At the time the board considered that rule, Republican Rodney Hood was board chairman. Now, Democrat Todd Harper is NCUA chairman, and he has made it clear that he opposes Hood’s plan.