Congressional Democrats Renew Push to Pass Overdraft Fee Legislation

Last month, sources told American Banker that the House Financial Services Committee had set aside the Overdraft Protection Act, a bill introduced by Rep. Carolyn Maloney (D-N.Y) to introduce a monthly cap on overdraft fees and require customers to opt into banks’ overdraft programs instead of opting out of them. Earlier this month, Rep. Maloney and her allies in this effort held a press conference pushing for the bill to receive a new lease on life. And today, the bill was one of the pieces of legislation discussed at a committee markup.

“I’m very pleased to see that some banks have finally taken the initiative to eliminate and reduce their fees, it’s concerning that it has taken so long for them to do so,” Maloney said at her press conference earlier this month. “We are working to put dollars back in consumers’ pockets [and] keeping the fees from going to corporations and financial institutions.”

Maloney was supported by senators Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.), and all acknowledged that although many banks have amended their overdraft policies, more needs to be done. In the last year, Ally Financial announced it would completely stop charging overdraft fees, and JPMorgan Chase increased its overdraft cushion from $5 to $50.

“The bill before us cuts back on unfair, unnecessary, deceptive fees, and according to the CFPB, will keep $8 billion a year, minimum, in consumers’ pockets,” Maloney said at today’s markup.

Still, Republicans at the markup pushed back on the effort, arguing that overdrafts provide many Americans with a form of short-term credit that they use responsibly when they need extra resources to make ends meet.

Rep. Blaine Luetkemeyer (R-Mo.) said at the hearing that if passed, the legislation would “force many financial institutions, particularly small community institutions, to stop offering overdraft services altogether.”

“I’m sure some of the members of the majority think that sounds great, but the reality would mean that consumers have even less resources and services at their disposal to cover unforeseen expenses.”

While expected to pass the committee, the legislation faces an unclear future in the House and Senate, both of which will need to pass it before it can be signed into law.