NY Enacts Law Tackling Overdraft Fees
As one of his final acts in office, now-former Democratic Governor of New York Andrew Cuomo signed a bill earlier this month targeting bank overdraft fees. The legislation will go into effect January 1, 2022, and will prohibit New York-regulated banks that offer consumer checking accounts from processing larger payments first.
“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 said in a statement. “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.”
Currently, banks can process checks starting with those for the largest amounts first, which has caused consumers to pay overdraft fees in some cases. Under the legislation, banks must process checks in the order they are received, or from smallest to largest dollar amounts for each business day’s transactions, according to American Banker.
Banks can currently decline to pay checks if the amount is higher than the existing checking account balance, and the new bill still permits them to do so. However, under the legislation, they must still process smaller checks that can be paid with the funds in the account, which they had been able to decline in the past. The bill also requires banks to disclose to consumers the order that they process the checks.