Sen. Chris Dodd’s battle against banking overdraft fees continues. He introduced a bill on October 19, covering ATM and debit-card transactions as well as checks. Several other Senators are on board with the reform, as the bill is co-sponsored by Senator Charles Schumer D-NY, Sen. Jack Reed D-RI,who is chairman of the Senate Banking Subcommittee on Securities, Insurance and Investment, as well as Sen. Sherrod Brown, D-OH, and Sen. Jeff Merkley D-OR.
Previously, Senator Dodd called for a bill that would limit the number of overdraft fees a bank could charge as well as allow consumers to opt-in to overdraft programs. This call prompted banks to change overdraft policies, thinking they could appease Congress without having to give up their huge profit-making business model.
On top of huge bonuses paid to executives in the “bailed out” banking industry, credit card fees and interest rates that are skyrocketing, I’m sick of the banks and their dirty little tricks in overdraft manipulation, transaction sorting being just one of them
What’s notable about this bill is it seeks to regulate not just the number but the amount of the overdraft fees, seeking to limit the fees to “reasonable” and “proportional” to the cost of processing the overdraft. I listened to a representative from the banking industry the other day on the Diane Rehm show talking about overdraft fees, and of course, defending them. One of the excuses is given for the outrageous costs is that it costs so much money for a bank to process a bounced check. Hello – isn’t this all computerized? Is there really any decision making done by humans during the process or is this just a computer program. Are there actually any costs at all in processing overdrafts?
The new law would be called the FAIR Overdraft Coverage Act. The major points of the proposed legislation:
- Require banks to get a customer’s consent before enrolling them in an overdraft protection program for ATM and debit card transactions;
- Limit the number of overdraft coverage fees banks can charge to one per month and six per year;
- Require fees be proportional to the cost of processing the overdraft;
- Stop institutions from manipulating the order in which they post transactions in order to rack up extra fees,
- Require customers be notified when they overdraw their account and be given the option of being notified by email, text or traditional mail; and
- Require that customers be warned if an ATM or branch teller transaction will overdraw their account, and be given the chance to cancel the transaction.
More details can be found at Sen. Dodd’s website.
Are you in favor of this legislation? Do you think it’s a good way to protect the public or just more government that we don’t need? Tell us by leaving a comment!
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I am in favor of having to tell you if you will overdraft when using an ATM or teller, as well as when using a debit card for POS transaction. But forcing fees to be reasonable is absurd. What is reasonable? How can a restaurant sell me $0.75 of pasta for $15 but a bank can’t have a similar mark-up? I never overdraft and so I never pay a fee. People should stop blaming the banks.
It’s about time that Congress get involved in protecting consumers from unethical banks. Fees ought to be proportional to the cost of processing the overdraft rather than some arbitrary figure that increases their profit margin. Notifying customers that they will overdraft is also necessary.
I commend Senator Dodd for his effort.
Oh, Andrew, I am sorry you lead such a sheltered life. I too, like you, used to defend the banks in thinking it was the always the consumer’s fault. But reality stepped in and show me changing the rules is the right thing to do. Have you ever been, say, poor? Ever have a debit card and checking account? Ever use the debit card for fast food and such? Ever realize that the bank will sort any bounce so the bounce will occur on your fast food (small) stuff and not your gas bill. So they get two or three bounces rather than one! So those coffees end up costing $105!! I’ll admit to the mistake, but hell no to the proportionality!!! And the next step for the poor is say the payday loan to cover the bank charges. And, uh, guess who owns the payday loan?? Banks? you’re right!! so another $25. Um, I try not to make mistakes, but if I scrape a car, I don’t believe I should replace the other guys car if it is just a scratch!
Maybe you do. More power to you!
Although it may be the consumer’s fault for over drafting, it’s completely unfair as to how banks place the order of these transactions. A $3 and $2 transaction were pending for 3 days before they decided to place a later $50 transaction ahead and so i got charged $70 extra. I remember calling Chase and being told, ” Well it’s really when the merchant decides to claim the money, we have no power over it.”