U.S. Sens. Sherrod Brown (D-OH) and Corey Booker (D-NJ) introduced legislation to prohibit banks from charging overdraft fees on certain purchases when customers do not have enough funds in their account.
The bill – the Stop Overdraft Profiteering Act of 2018 — would ban overdraft fees on debit card transactions and ATM withdrawals. Further, it would limit fees imposed on bounced checks and recurring payments. It would also mandate that banks post transactions in a way that minimizes overdraft and nonsufficient fund fees.
The lawmakers explained that banks often reorder transactions in a way to maximize overdraft fees. This means, in some cases, that consumers face multiple charges.
“Overdraft fees are a tax on paychecks already stretched thin,” Brown said. “This bill keeps hardworking Americans’ money in their pockets and stops big banks from slapping big fees on customers for small overdraft amounts.”
Additionally, financial institutions would not be able to charge more than one overdraft fee per month for check and recurring bill payment overdrafts. They also would not be able to charge for more than six per calendar year. The overdraft fees for check and recurring bill payment must be reasonable and proportional to the bank’s costs in providing the overdraft coverage.
“For millions of hardworking Americans, every day is a struggle – they find themselves one late check or unexpected expense away from financial free fall,” Booker said. “Wages aren’t going up, but the cost of everything else is, from prescription drugs to housing costs to pocketbook pain points like the fees banks charge consumers for overdraft services. These fees generate enormous amounts of revenue for the banks while most customers don’t even know they’ve opted into such charges. Worse yet, overdraft fees fall on those least likely to be able to afford them – individuals for whom a $35 overdraft charge could push them over the brink into financial ruin.”
The lawmakers said that three of the largest banks in the country collected over $5 billion in overdraft fees last year.
“Our bill would end these unfair practices many banks use that leave some consumers – especially those that are the most vulnerable – trapped in a vicious cycle of poverty,” Booker said.