In response to today’s news that the Federal Reserve will take the initial step of instituting new rules restricting overdraft fees on debit cards, U.S. Representative Kendrick B. Meek today called for a full curb on excessive and unfair bank overdraft fees.
“This is a great first step to ensure consumer protection, but Congress can move further on this pocketbook issue,” said Congressman Meek.
In 2005, Meek took the lead on this issue by introducing the Overdraft Fee Notification Act, which would have prohibited financial institutions from imposing fees or charges for consumer overdrafts without prior notification and consumer consent at the time of the transaction, much in the same way as non-institution ATM fees are accepted or declined by users. The bill required such notification for all in-person, automated, telephonic, and internet-based financial transactions.
“For too long, banks have been permitted to levy exorbitant charges on the backs of everyday customers by quietly enrolling them in so-called ‘overdraft protection programs’ that fall outside of notification requirements in current law,” said Meek.
“Consumers need to have all the information available to them so they can make educated financial decisions. This includes being allowed to opt-in to such a service as well as being able to decline it at any time. This legislation will push back against these fees and put the interests of the American people before the priorities of the powerful banking lobby.”
Currently, a growing number of banks levy unfair fees on their customers by allowing overdrafts on accounts without alerting the customer. Current law requires that banks gain affirmative approval from consumers to enroll them into overdraft programs that draw funds from lines of credit or from their savings accounts. These disclosures must include a statement of associated fees and charges for overdrafts whether or not the consumer is enrolled in such a program. However, after enrolling, many banks automatically give their customers a “gratuity”, or other short-term line of credit without notifying the customer, to cover account shortfalls and, in some cases, actually show the “phantom” money as available funds when customers ask for an ATM balance. Failing to alert consumers at the point of sale that they are triggering the overdraft protection is particularly frustrating for consumers whose shortfalls from ATM withdrawals, debit card purchases, or electronic transfers are often far less than the associated overdraft fees they receive.
The most recent legislation currently being considered before Congress, H.R. 3904, the Overdraft Protection Act, includes many of the same provisions from Rep. Meek’s original bill.
To read the full text of the current bill, please see the following website:
Thursday, November 12, 2009
Rep. Kendrick B. Meek Calls for a Full Curb on Unfair and Excessive Bank Overdraft Fees
Posted by Professor Rex at 5:39 PM