H. R. 3904
IN THE HOUSE OF REPRESENTATIVES
October 22, 2009
Mrs. Maloney (for herself, Mr. Frank of Massachusetts, Ms. Waters, Mr. Maffei, Mr. Miller of North Carolina, Mr. Hinojosa, Ms. Moore of Wisconsin, Mr. Hodes, Mr. Capuano, Mr. Ackerman, Mr. Kanjorski, Mr. Ellison, Mr. Gutierrez, Ms. Speier, Ms. Eshoo, and Mr. Jones) introduced the following bill; which was referred to the Committee on Financial Services
To amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions, and for other purposes.
This Act may be cited as the
Overdraft Protection Act of
Findings and purpose
Section 102 of the Truth in Lending Act (15 U.S.C. 1601) is amended by adding at the end the following new subsection:
Fairness and accountability in overdraft coverage
The Congress also finds that—
overdraft coverage is a form of short-term credit that depository institutions provide for consumer transaction accounts. Historically, depository institutions covered overdrafts for a fee on an ad hoc basis;
with the growth in specially designed software programs and in consumer use of debit cards, overdraft coverage for a fee has become more prevalent;
most depository institutions do not notify consumers when adding this feature to their transaction accounts, and some do not permit consumers to eliminate this feature from such accounts;
most depository institutions collect a high flat fee, including for small dollar transactions, each time the institution covers an overdraft, in some cases impose multiple overdraft coverage fees within a single day, and many charge additional fees for each day during which the account remains overdrawn; and
such abusive and misleading practices in connection with overdraft coverage fees have deprived consumers of meaningful choices about their accounts and placed significant financial burdens on low- and moderate-income consumers.
It is the purpose of this title to protect consumers by limiting abusive and misleading overdraft coverage fees and practices, and by providing meaningful disclosures and consumer choice in connection with overdraft coverage fees.
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by adding at the end the following new subsection:
Definitions relating to overdraft coverage
The term check has the same meaning as in section 3(6) of the Check Clearing for the 21st Century Act (12 U.S.C. 5001 et seq.), other than a travelers check.
institution has the same meaning as in clauses (i) through (vi) of
section 19(b)(1)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)).
Nonsufficient fund fee
nonsufficient fund fee means a
fee or charge assessed in connection with an overdraft for which a depository
institution declines payment.
overdraft means the amount of a withdrawal by check or
other debit from a transaction account in which there are insufficient or
unavailable funds in the account to cover such check or debit.
The term overdraft coverage means the payment of a check presented or other debit posted against a transaction account by the depository institution in which such account is held, even though there are insufficient or unavailable funds in the account to cover such checks or other debits.
Overdraft coverage fee
The term overdraft coverage fee means any fee or charge assessed in connection with overdraft coverage, or in connection with any negative account balance that results from overdraft coverage, unless such fee or charge is imposed in connection with—
an extension of credit through an overdraft line of credit program where such fee or charge was considered a finance charge under this title as in effect immediately prior to the enactment of the Overdraft Protection Act of 2009; or
any transfer from an account linked to another transaction account.
finance chargefor purposes of section 106(a), but shall not be included in the calculation of the rate of interest for purposes of section 107(5)(A)(vi) of the Federal Credit Union Act (12 U.S.C. 1757(5)(A)(vi))
Overdraft coverage program
program means a service under which a depository institution assesses
an overdraft coverage fee for overdraft coverage.
The term transaction account has the same meaning as in section 19(b)(1)(C) of the Federal Reserve Act (12 U.S.C. 461(b)(1)(C)).
Section 107(5)(A)(vi) of the Federal Credit Union Act
(12 U.S.C. 1757(5)(A)(vi)) is amended by inserting
, other than an
overdraft coverage fee, as defined in section 103(cc) of the Truth in Lending
Act (12 U.S.C. 1602(cc)) after
inclusive of all finance
Fair marketing and provision of overdraft coverage programs
Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by adding at the end the following new section:
Overdraft coverage program disclosures and consumer protection
No depository institution may engage in acts or practices in connection with the marketing of or the provision of overdraft coverage that are unfair, deceptive, or designed to evade the provisions of this section.
Each depository institution that provides or offers to provide overdraft coverage with respect to transaction accounts held at that depository institution shall clearly and conspicuously disclose in all marketing materials for such overdraft coverage any overdraft coverage fees.
Consumer consent opt-In
A depository institution may charge overdraft coverage fees only if the consumer has consented in writing, in electronic form, or in such other form as is permitted under regulations of the Board.
Each depository institution shall clearly disclose to each consumer covered by an overdraft protection program of that depository institution—
the consumer may be charged for not more than one overdraft coverage fee in any single calendar month and not more than 6 overdraft coverage fees in any single calendar year, per transaction account; and
the depository institution retains the discretion to pay (without assessing an overdraft coverage fee) or reject overdrafts incurred by the consumer beyond the numbers described in subparagraph (A);
information about any alternative overdraft products that are available, including a clear explanation of how the terms and fees for such alternative services and products differ; and
such other information as the Board may require, by rule.
Each depository institution that offers an overdraft coverage program shall, in each periodic statement for any transaction account that has an overdraft coverage program feature, clearly disclose to the consumer the dollar amount of all overdraft coverage fees charged to the consumer for the relevant period and year to date.
Exclusion from account balance information
No depository institution may include the amount available under the overdraft coverage program of a consumer as part of the transaction account balance of that consumer.
Each depository institution shall promptly notify consumers, through a reasonable means selected by the consumer, when overdraft coverage has been accessed with respect to the account of the consumer, not later than on the day on which such access occurs, including—
the date of the transaction;
the type of transaction;
the overdraft amount;
the overdraft coverage fee;
the amount necessary to return the account to a positive balance; and
whether the participation of a consumer in an overdraft coverage program will be terminated if the account is not returned to a positive balance within a given time period.
Terminated or suspended coverage
Each depository institution shall provide prompt notice to the consumer, using a reasonable means selected by the consumer, if the institution terminates or suspends access to an overdraft coverage program with respect to an account of the consumer, including a clear rationale for the action.
Notice and opportunity To cancel
Each depository institution shall—
warn any consumer covered by an overdraft coverage program who engages in a transaction through an automated teller machine or a branch teller if completing the transaction would trigger overdraft coverage fees, including the amount of the fees; and
provide to the consumer the opportunity to cancel the transaction before it is completed.
Overdraft coverage fee limits
A depository institution may charge not more than one overdraft coverage fee in any single calendar month, and not more than 6 overdraft coverage fees in any single calendar year, per transaction account.
Reasonable and proportional overdraft coverage fees
The amount of any overdraft coverage fee that a depository institution may assess for paying a transaction (including a check or other debit) shall be reasonable and proportional to the cost of processing the transaction.
Safe harbor rule authorized
The Board, in consultation with the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, and the National Credit Union Administration Board, may issue rules to provide an amount for any overdraft coverage fee that is presumed to be reasonable and proportional to the actual cost of processing the transaction.
In order to minimize overdraft coverage fees charged to consumers, each depository institution shall post transactions with respect to transaction accounts in such a manner that the consumer does not incur avoidable overdraft coverage fees.
No depository institution may charge an overdraft coverage fee on any category of transaction, if the overdraft results solely from a debit hold amount placed on a transaction account that exceeds the actual dollar amount of the transaction.
Nondiscrimination for not opting in
In implementing the requirements of this section, each depository institution shall provide to consumers who have not consented to participate in an overdraft coverage program, transaction accounts having the same terms, conditions, or other features as those that are provided to consumers who have consented to participate in such overdraft coverage program, except for features of such overdraft coverage.
Nonsufficient fund fee limits
No depository institution may charge any nonsufficient fund fee with respect to—
any transaction at an automated teller machine; or
any debit card transaction.
Reports to consumer reporting agencies
No depository institution may report negative information regarding the use of overdraft coverage by a consumer to any consumer reporting agency (as that term is defined in section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a)) when the overdraft amounts and overdraft coverage fees are paid under the terms of an overdraft coverage program.
Rule of construction
No provision of this section may be construed as prohibiting a depository institution from retaining the discretion to pay, without assessing an overdraft coverage fee or charge, an overdraft incurred by a consumer.
Regulatory authority of the Board
Not later than 9
months after the date of the enactment of this Act (except as provided in
subsection (b)), the Board of Governors of the Federal Reserve System
(hereafter in this Act referred to as the
consultation with the Comptroller of the Currency, the Board of Directors of
the Federal Deposit Insurance Corporation, the Director of the Office of Thrift
Supervision, and the National Credit Union Administration Board, shall issue
such final rules and publish such model forms as necessary to carry out section
140B of the Truth in Lending Act, as added by this Act.
Board authority regarding additional warnings
The Board may, by rule, after taking into account the findings of the Comptroller General of the United States under section 6, require warnings at locations such as point-of-sale transfer terminals or other locations, that are similar to those required under section 140B(i) of the Truth in Lending Act, as added by this Act, where feasible, and if the cost of providing such warnings does not outweigh the benefit to consumers.
Study and report by the GAO
The Comptroller General of the United States shall conduct a study regarding whether it is feasible for a depository institution—
to provide a warning to a consumer at a point-of-sale transfer terminal that completing a transfer may trigger overdraft coverage fees; and
to provide the consumer with the opportunity to cancel the point-of-sale transfer before the transaction is completed.
In conducting the study under this subsection, the Comptroller General shall evaluate—
the benefits to consumers of a point-of-sale transfer overdraft warning and opportunity to cancel;
the availability of technology to provide such a warning and opportunity; and
the cost of providing such warning and opportunity.
Report to Congress
Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report to Congress on the results of the study conducted under subsection (a).
As used in this section, the terms overdraft coverage program, overdraft coverage fee, and depository institution have the same meanings as in section 103(cc) of the Truth in Lending Act, as added by this Act.
This Act and the amendments made by this Act shall take effect 1 year after the date of the enactment of this Act, whether or not the rules of the Board under this Act or such amendments are prescribed in final form.
Moratorium on fee increases
During the 1-year period beginning on the date of the enactment of this Act, no depository institution may increase the overdraft coverage fees or charges assessed on transaction accounts for paying a transaction (including a check or other debit) in connection with an overdraft or for nonsufficient funds.
used in this section, the terms
overdraft coverage fee,
transaction account and
nonsufficient fund fee
have the same meanings as in section 103(cc) of the Truth in Lending Act, as
added by this Act.