U.S. House and Senate proposals promise significant reform

Regulators have failed to stop our nation's financial institutions from moving from a policy of discouraging overdrafts to that of encouraging and maximizing overdrafts to drive up fees. The Overdraft Protection Act of 2009, H.R. 3409, introduced by Congresswoman Carolyn Maloney in October 2009, would make meaningful reform with measures similar to the FAIR Overdraft Coverage Act proposed in the U.S. Senate. H.R. 3409 would:

  • require financial institutions to obtain explicit permission from all their customers before enrolling them in a system of fee-based overdraft coverage for any checking account transactions;
  • require that an overdraft fee charged on any transaction be reasonable and that its size bear some relationship to the cost of covering the overdraft;
  • prohibit reordering of customer transactions to trigger otherwise avoidable overdraft fees;
  • and limit the number of overdraft fees per person to six a year and no more than one a month. At that point, financial institutions would have to enroll the consumer in a lower-cost program or stop charging for covering overdrafts.

The Center for Responsible Lending strongly supports the Overdraft Protectin Act of 2009 as it would represent a major advance in overdraft reform.

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