House Financial Services Committee Pulls Bill Limiting Overdraft Practices
Two sources have told American Banker that the House Financial Services Committee (HFSC) recently set aside the Overdraft Protection Act, a bill introduced by Representative Carolyn Maloney (D-N.Y.) last year. The bill would introduce a monthly cap on overdraft fees and require customers to opt into banks’ overdraft programs instead of opting out of them.
“Protecting consumers has never been easy,” Maloney said to American Banker in a statement. “It wasn’t easy when we passed my Credit Cardholders Bill of Rights and it won’t be easy now, but I am determined to see this through and get [the overdraft bill] over the finish line in the near future.”
Democrats and the Consumer Financial Protection Bureau have been increasingly interested in banks’ overdraft practices, and many banks have eliminated or scaled back their overdraft programs. This year alone, the House Financial Services Committee and a Senate Banking Subcommittee have held hearings on banks’ overdraft policies, and attorneys general from more than a dozen states sent letters to four banks urging them to eliminate overdraft fees for consumers.
However, some Republicans and bank advocates have criticized the crackdown on the fees, arguing that many customers rely on overdrafts as a short-term credit alternative to payday lending.
Although the HFSC has four more Democrats than Republicans, the bill did not get enough Democratic votes to pass through the committee.
Maloney noted that recent research from the Consumer Financial Protection Bureau (CFPB) found that 80 percent of overdraft fees are paid by only 9 percent of consumers.
“Congress needs to stand with the consumers who are unfairly targeted by these fees,” she said.