Overdraft Bill Introduced Posted by AVCU on 5:01 PM

Today, Senator Dodd (D-CT) announced that he is about to introduce legislation to reform overdraft protection programs. Among other things, Dodd’s bill will: 

• require consumers to opt-in to their bank or credit union's overdraft protection program, and prohibit discrimination against consumers who do not opt-in.  
• limit the number of fees that could be assessed to a consumer to one per month and no more than six per year. 
• require fees to be proportional to the cost of processing the overdraft and prohibits the manipulation of debits in order to generate additional overdraft. 
• call on the GAO to conduct a study on the feasibility of point-of-sale disclosure that a transaction will cause an overdraft. 
• require the overdraft fee to be considered a finance charge under TILA, but would not include the fee in the calculation of interest for the purposes of the usury ceiling in the Federal Credit Union Act.

CUNA opposes this legislation in keeping with its policy on overdraft protection legislation. This legislation will not only have an adverse impact on the programs credit unions already offer to members, but will also directly affect consumers. The bill takes away consumer choice by limiting the number of times a consumer can use overdraft protection, and could lead some consumers to choose payday lenders, pawnbrokers or other providers to address their short term cash flow issues.  In short, this legislation will make it more difficult for credit unions to serve their members at a time when they need the services of a credit union the most. 

 

We’ll keep you posted on whether and when this legislation will be considered by the Senate Banking Committee.