Congressional Action on Overdraft Changes Heats Up

A second bill to regulate financial institutions overdraft practiced is scheduled to be introduced to the Senate the week of July 22nd by Senator Brown (D–Ohio)Action on overdraft practices has increased since the CFPB released its study of overdraft programs which found that “overdraft programs can be costly for the consumers who use them, and that both consumer outcomes and policies related to overdraft programs can vary considerably.”

The first bill, H.R. 1261, was introduced by U.S. Representative Maloney (D-NY). H.R. 1261 would:

  • Require overdraft fees to be reasonable and proportional;
  • Limit overdraft to one per month and six per year;
  • Codify the opt-in provisions that the Fed promulgated requiring that consumers opt-in to overdraft coverage;
  • Prohibit institutions from manipulating the order of transactions to maximize overdraft fees; and
  • Add additional disclosures to consumers about overdraft coverage programs

Senator Brown’s bill, which is still being finalized, would:

  • Empower the Consumer Financial Protection Bureau to monitor financial institutions overdraft practices;
  • Require the CFPB establish fair guidelines to protect consumers; and
  • Require financial institutions post transactions and communicate process in an easy to understand format.
  • Provide safe harbor for financial institutions that follow CFPB overdraft guidelines.

This congressional activity could seriously impact overdraft programs offered by credit unions throughout the country

The Credit Union National Association and state leagues and associations across the country are urging credit unions to engage their members in preserving the tax status of credit unions. Credit unions, in turn, are doing their part, including asking for “love letters.”

Source: CUNA