Senators Seek to Ban Bank Overdraft Charges at ATMs


U.S. Senators Cory Booker (D-NJ) and Sherrod Brown (D-OH) have introduced legislation to crack down on overdraft fees banks charge consumers when they make a purchase or pay a bill, but don’t have sufficient funds in their account.

Called The Stop Overdraft Profiteering Act of 2018, the new legislation would ban overdraft fees on ATM withdrawals, as well as debit card transactions. In addition, the new regulations would limit fees placed for checks and recurring payments. It would also make banks post transactions in a manner that minimizes overdraft and nonsufficient fund fees, curtailing the widespread practice of re-ordering transactions to maximize overdraft fees.

“For millions of hardworking Americans, every day is a struggle – they find themselves one late check or unexpected expense away from financial free fall,” Booker said. “I see this in my community in Newark on a daily basis. Wages aren’t going up, but the cost of everything else is, from prescription drugs to housing costs to pocketbook pain points like the fees banks charge consumers for overdraft services. These fees generate enormous amounts of revenue for the banks while most customers don’t even know they’ve opted into such charges.

“Worse yet,” he continued, “overdraft fees fall on those least likely to be able to afford them – individuals for whom a $35 overdraft charge could push them over the brink into financial ruin. Our bill would end these unfair practices many banks use that leave some consumers – especially those that are the most vulnerable – trapped in a vicious cycle of poverty.”

Specifically the Stop Overdraft Profiteering Act of 2018 would:

– Prohibit overdraft fees on debit card transactions and ATM withdrawals.

– Prohibit financial institutions from charging more than one overdraft fee per month and no more than six overdraft fees in any single calendar year for check and recurring bill payment overdrafts.

– Limit check and recurring bill payment overdrafts fees to an amount that is reasonable and proportional to the financial institution’s costs in providing the overdraft coverage.

– Mandate a three-day waiting period between when an individual opens a new account and when a financial institution may offer overdraft protection.

– Mandate that depository institutions post transactions in a manner that minimizes overdraft and nonsufficient fund fees.

– Increase other consumer disclosures related to overdraft coverage programs.

Background on overdraft fees:

The legislation follows a letter Booker sent last year to the CEOs of 13 banks – the top ten U.S. banks in overdraft revenue, as well as the U.S. banks with over $2 billion in assets that take in the most overdraft revenue per account – requesting more information on their current practices as they relate to overdraft fees. Based on the responses to that request, as well as relevant data from banks’ publicly available disclosures and quarterly financial filings, Booker’s office recently released a comprehensive report outlining how banks use overdraft fees in ways that often don’t serve the best interests of consumers.

A full copy of the bill can be found here.



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