WASHINGTON–Senators Cory Booker (D-NJ) and Elizabeth Warren (D-MA) have reintroduced legislation that seeks to crack down on what they allege are exploitative overdraft fees.
The Stop Overdraft Profiteering Act of 2021 would ban overdraft fees on debit card transactions and ATM withdrawals, and limit fees placed for checks and recurring payments. The bill would further mandate that financial institutions post transactions in a manner that minimizes overdraft and nonsufficient fund fees.
‘Billions in Revenue’
“Exploitative and excessive overdraft fees allow banks to reap enormous profits at the expense of the most economically vulnerable people,” said Booker. “Even when accounting for the temporary and uneven measures that the industry took to provide relief to consumers throughout the pandemic, banks continued to make billions of dollars of revenue last year on the backs of their most vulnerable consumers. Our bill will require banks to institute overdraft protections and transparency measures that protect consumers and put an end to the unfair practices that can often be the tipping point toward financial ruin for struggling families. Families emerging from this crisis cannot continued to be saddled by these burdensome and abusive practices.”
Added Warren, who has grilled bank executives about overdraft fees during Senate hearing, “While the COVID-19 pandemic has swept across the country and millions of families have struggled financially, big banks have reaped in billions of profits made from overdraft fees. I am glad to introduce this critical legislation with Senator Booker to protect consumers and crackdown on these predatory practices.”
The Specifics
Specifically the Stop Overdraft Profiteering Act of 2021 seeks to:
- Prohibit overdraft fees on debit card transactions and ATM withdrawals.
- Prohibit financial institutions from charging more than one overdraft fee per month and no more than six overdraft fees in any single calendar year for check and recurring bill payment overdrafts.
- Limit check and recurring bill payment overdrafts fees and non-sufficient fund fees to an amount that is reasonable and proportional to the financial institution’s costs in providing the overdraft coverage.
- Mandate a three-day waiting period between when an individual opens a new account and when a financial institution may offer overdraft protection.
- Mandate that depository institutions post transactions in a manner that minimizes overdraft and nonsufficient fund fees.
- Increase other consumer disclosures related to overdraft coverage programs.
History on Issue
Both Booker and Warren have a history of pushing for changes in overdraft practices. In 2018 they sent a letter, signed by 13 senators in all, to the Consumer Financial Protection Bureau questioning its plan to no longer pursue regulatory action on overdraft fees, after it failed to mention action in its most recent regulatory agenda filing, even though it had been on the Bureau’s agenda for four years.
In 2020 Booker also filed legislation to ban overdraft fees during the pandemic.
As CUToday.info reported here, Alliant Credit Union recently announced it is eliminating its overdraft fees.