House Committee Chairs introduce legislation to prohibit banks from assessing overdraft fees during the coronavirus pandemic.
House of Representatives Antitrust Subcommittee Chairman David N. Cicilline (D-RI) has introduced legislation, the Stop Overdraft Profiteering during COVID–19 Emergency Act of 2020 (H.R. 6576), intended to prohibit banks from collecting overdraft fees during the COVID-19 pandemic. The stated purpose of the bill is to prohibit depository institutions from assessing overdraft and non-sufficient fund fees during the novel coronavirus crisis and other disasters. Cicillini called it "critical that Congress do whatever it takes to make sure working people get through this crisis with their finances intact." He referred to the legislation as "a commonsense bill that protects consumers. Members of both parties should get behind it today." House Oversight and Reform Committee Chair Carolyn Maloney (D-NY), a co-sponsor of the bill, stated that with the COVID-19 pandemic, "more Americans are struggling financially" and even one overdraft penalty "can quickly trigger hundreds of dollars in fees and drive customers into a financial hole." According to Maloney, in the current crisis, rising unemployment means more Americans are at risk of being impacted by overdraft fees.
The proposed legislation would do the following:
- prohibit financial institutions from assessing overdraft fee or nonsufficient fund fee for any transaction, including at ATMs, at the register, or involving checks or recurring payments;
- ban financial institutions from reporting consumers’ use of overdraft coverage to a credit reporting agency; and
- allow financial institutions to extend a reasonable overdraft line of credit to consumers with insufficient funds.
Pew report/CFPB study. Maloney noted in her release that in 2017 consumers paid more than $34 billion in overdraft fees, while many consumers do not know if they have opted-in to overdraft services. She cited a 2014 Pew report, which concluded that more than half of people who overdrew their checking accounts, and who were charged an overdraft fee in the year before, could not recall consenting to the coverage.
Maloney also referred to a 2014 study conducted by the CFPB which found that most debit card overdraft fees are triggered by transactions of less than $25 and repaid within three days, which is the equivalent of a 17,000 percent annual percentage rate (APR). The study was based on data from a set of large banks supervised by the CFPB. The study reflects a significant portion of U.S. consumer checking accounts and was supplemented by other research and responses to a CFPB Request for Information notice issued to the public in February 2012.
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