Alert October 20, 2009

Overdraft Bill Introduced in Senate

Senate Banking Committee Chairman Chris Dodd introduced an overdraft bill in the Senate. The bill would, among other things:

  • Require customers opt-in before enrollment in overdraft coverage programs that charge fees for covering ATM withdrawals and debit card transactions.
  • Prohibit banks from charging more than one overdraft fee a month and more than six a year.
  • Require overdraft fee amounts be proportional to the cost of processing the overdraft.
  • Prohibit changing the order in which transactions are posted to increase overdraft fees.
  • Prohibit fees if an overdraft is due solely to a bank hold – such as the hold placed on funds when reserving a hotel room - if the hold is greater than the actual amount of the transaction.
  • Require customers be notified when they overdraw their account and give the customer the option of choosing to be notified by email, text or a letter.
  • Require that customers be warned if a transaction at an ATM or branch teller will overdraw their account, and be given the chance to cancel the transaction.
  • Require periodic statements clearly disclose the amount of overdraft coverage fees charged for the statement period and year-to-date.
  • Prohibit banks from including the amount available under an overdraft coverage program as part of the customer’s account balance.
  • Require banks to inform customers of the different overdraft services and products they provide, including how terms, fees and products differ.
  • Require customers be notified, by a medium of their choice, if an overdraft coverage program is terminated or suspended and why.
  • Prohibit unfair and deceptive marketing practices of overdraft coverage programs and require clear disclosure of overdraft fees in marketing materials.
  • Prohibit banks from negatively reporting to consumer credit report agencies if an overdraft amount and fee are paid under the terms of an overdraft coverage program.
Click here for the Committee press release on the bill.