Center for Responsible Lending
Consumer Federation of America
Consumers Union
National Consumer Law Center, on behalf of its low-income clients
U.S. PIRG
WASHINGTON, Oct. 21 /PRNewswire-USNewswire/ -- Consumer groups strongly support Senator Christopher Dodd for introducing a bill this week that would curb many of the abusive overdraft practices of banks and credit unions. Those practices now strip nearly $24 billion annually from checking accounts, primarily from Americans living paycheck-to-paycheck.
The "Fairness and Accountability in Receiving Overdraft Coverage Act" ("FAIR Act") that Dodd has proposed would require financial institutions to obtain explicit permission from all their customers before enrolling them in a system of fee-based overdraft coverage for debit card and ATM transactions. This action is long overdue and one that we hope the Federal Reserve also will take later this year.
The bill also offers additional, major reforms that the Fed has failed to propose, much less adopt. In addition to requiring express consent--which should be an essential, baseline protection for any credit product--the FAIR Act would, among other protections:
-- require that an overdraft fee charged on any transaction be reasonable
and that its size bear some relationship to the cost of covering the
overdraft;
-- prohibit reordering of customer transactions to trigger otherwise
avoidable overdraft fees;
-- limit the number of overdraft fees per person to six a year and no more
than one a month. At that point, financial institutions would have to
enroll the consumer in a lower-cost program or stop charging for
covering overdrafts.
We are pleased that this bill would put long-overdue brakes on abusive overdraft practices by banks and credit unions, practices that make holding on to and managing the money in their checking accounts difficult for many Americans. We urge Congress to pass the FAIR Act as soon as possible.
SOURCE Center for Responsible Lending
Center for Responsible Lending
