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May 10, 2012
Categories: Consumer Lending Home-Secured Lending Accounts

Overdraft Programs Under Attack; Recap of Reg Burden Hearing

Written by Steve Van Beek

As if the CFPB's Inquiry into Overdrafts wasn't enough, there are continued pushes by both consumer groups and lawmakers to drastically change overdraft protection programs.  Oh, and the New York Times stepped in as well to write an op-ed.   

Congress.  This seems like the Credit CARD Act all over again.  Remember how the Federal Reserve was working on amending and changing the credit card disclosures and rules but Congress forced the Credit CARD Act through anyway?  You know, the Credit CARD Act that is still being clarified, tweaked and amended because it was so poorly written.     

Well, even as the CFPB conducts its "inquiry" into Overdraft Protection (comment period extended to June 29th) - Congress is at it again.  

Overdraft Protection Act.  Representative Carolyn Maloney (and 46 co-sponsors) announced she would introduce legislation that would:

  • Extend the opt-in requirement to paper checks, ACHs and recurring debit transactions;
  • Define overdraft fees as finance charges for Truth in Lending Act disclosures (Ed: Huh??);
  • Prohibit the ordering of transactions to maximize overdrafts;
  • Require that fees be "reasonable and proportional" to the amount of the overdraft;
  • Cap the number of fees at one per month and six per year;
  • Add new disclosures prior to opt-in and whenever an overdraft fee is charged; and
  • Require the CFPB to study overdraft fees on prepaid debit cards.

I guess when they say they want to "Stop Overdraft Protection" they are serious.  This bill (we haven't seen the full text yet) would pretty much do just that.  I can't imagine too many institutions continuing to provide this service if a bill along these lines would actually pass.  

But, I wonder if Congress is worried that if they prohibited overdraft protection it would force consumers to actually keep track of their spending and take some responsibility.  Now, that would be draconian.  

Consumer Groups.  If you haven't seen the recent Pew Study on Overdrafts, it is worth a read.  Also be sure to pass around your credit union.  This is what is being handed out to the CFPB and Congress in pushes to change the current overdraft rules.

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On the Hill.  The NAFCU Today has a great recap of yesterday's hearing on Rising Regulatory Compliance Costs.  

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