WASHINGTON–The House Committee on Financial Services has passed a bill opposed by both credit union trade associations, H.R. 4277, the Overdraft Protection Act.
The legislation, introduced by Rep. Carolyn Maloney (D-NY), seeks to put in place limits on overdraft fees, prohibit certain exploitive practices meant to optimize overdraft fee revenue, and establish “transparent” overdraft practices for all consumers.
In addition, the bill calls for NSF fees to be reasonable and proportional to cost and prohibits what proponents have called “predatory practices,” such as re-ordering transactions to artificially increase fees.
Both CUNA and NAFCU have expressed their opposition to the bill.
NAFCU Outlines Opposition
In a letter sent to the Hill ahead of the vote, NAFCU said its main concerns lie with the various restrictions and the failure to recognize the “opt-in” feature many overdraft products have today.
NAFCU told Congress its surveys have found that a vast majority of credit unions report offering specialized intervention and financial education for those who frequently use courtesy pay programs, to ensure that consumers are not overly reliant on these programs and are able to improve their financial health
The trade group also said many credit unions do not assess fees when an account is overdrawn by a de minimis amount and some place caps on the total number of NSF fees that can accumulate in a given period.
Support from Consumer Groups
Consumer groups have praised the committee for moving the bill forward.
“We applaud Congresswoman Maloney and the House Financial Services Committee on passing this critical legislation that will protect consumers from abusive overdraft fees,” said Rachel Gittleman, financial services outreach manager at Consumer Federation of America. “These fees are borne predominately by those who can least afford them and disproportionately fall on low-income consumers and consumers of color. Consumers cannot wait for banks to individually put an end to this practice—the cost is just too high.”
In its statement, the CFA called overdraft fees a financial powerhouse for the banks and credit unions that charge them with revenue for overdraft and NSF fees reaching $15.47 billion in 2019.