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H.R. 5198 (114th): Overdraft Protection Act of 2016

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The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on May 11, 2016.

Overdraft Protection Act of 2016

This bill amends the Truth in Lending Act to prohibit a depository institution from engaging in unfair or deceptive acts or practices in connection with overdraft coverage, or in acts designed to evade the provisions of this Act.

Each depository institution that offers or provides overdraft coverage for transaction accounts held at the institution shall clearly and conspicuously disclose overdraft coverage fees. It must also disclose that, if a consumer does not opt-in to such overdraft coverage:

the consumer's transaction may be declined if there are insufficient funds in the related transaction account, and the consumer will not be charged a fee if such transaction is declined. A depository institution may charge overdraft coverage fees in connection with use of an automatic teller machine (ATM) or point of sale transaction only if the consumer has consented in writing, in electronic form, or in another form permitted by the Consumer Financial Protection Bureau.

A depository institution must provide specified consumer disclosures regarding its overdraft protection program, including:

periodic statements for any transaction account that has an overdraft coverage program feature; prompt notification of the account's overdraft status; and the overdraft coverage fee as an annual percentage rate, permitting consumers to compare meaningfully the overdraft coverage to alternative forms of overdraft options and other sources of credit. The bill prescribes overdraft coverage fee limits.

The bill prohibits an overdraft coverage fee if the overdraft results solely from a debit hold amount that exceeds the actual dollar amount of the transaction.

A depository institution shall provide consumers who have not consented to participate in an overdraft coverage program transaction accounts with the same terms as those provided to consumers who have consented to participate in such program.

The bill prohibits a depository institution from:

charging a non-sufficient fund fee for any ATM or debit card transaction, or reporting negative information regarding consumer use of overdraft coverage to any consumer reporting agency when the overdraft amounts and coverage fees are paid under the terms of an overdraft coverage program.