ALBANY, N.Y.–Prior to his resignation from office, New York Gov. Andrew Cuomo signed a bill that New York’s state-chartered financial institutions to process checks in the order they are received, or from smallest to largest, to prevent consumers from racking up fees for overdrawing their accounts.
"If a bank receives a check for a greater amount of money than the balance in the account, it may decline to pay the check," the governor’s office said in a statement. "However, the banking institution must honor any smaller checks that can be paid with the existing account balance."
Under the current law, state-chartered institutions can reject the subsequent smaller checks, even if there are sufficient funds in the account to cover those expenses.
The new law is scheduled to take place on Jan. 1, 2022 and comes at the same time there is significant national attention to the issue on overdrafts, including from Congress. Credit unions and other institutions also continue to face litigation or the threat of litigation related to overdraft practices.
"The COVID pandemic had a devastating effect on our economy and as a result, many New Yorkers still struggle to pay their bills, and the arbitrary overdraft fees that banks have continued to issue only add insult to injury," Cuomo’s statement continued. "This legislation will require banks to take several actions that reduce the opportunities for charging overdraft fees and keep more money in New Yorkers’ pockets. We continue to face the economic impacts of the COVID-19 pandemic and this commonsense bill will help many of the state’s residents who need it most."