Leading Democrats redouble efforts to pass overdraft protection bill

WASHINGTON — Democratic lawmakers and consumer advocates renewed their push for new legislation to limit banks’ ability to charge overdraft fees, suggesting such a bill could clear a key House committee as soon as this month.

Speaking at a press conference near the Capitol East Front plaza, Rep. Carolyn Maloney, D-N.Y., led an appeal for Congress to take up and pass the Overdraft Protection Act, a bill she authored that would introduce a monthly cap on the number of times such fees could be charged to customers and require that customers opt in to overdraft programs rather than opt out.

Overdraft fees have increasingly drawn the ire of consumer advocates over the past several months, particularly at banks where overdraft fee revenue constitutes a large chunk of the institution’s overall profit. 

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Maloney, who was joined by Democratic Sens. Elizabeth Warren of Massachusetts and Cory Booker of New Jersey, acknowledged that many banks have reformed their overdraft practices over the past year but argued that there was more to be done. 

In the past year, a significant number of large and regional banks have amended their overdraft policies, but that relief has ranged from amending the way overdrafts are charged to doing away with them altogether. Ally Financial announced last year that it would stop charging overdraft fees entirely, while in August JPMorgan Chase increased its overdraft cushion from $5 to $50. Regions Bank and several other banks have amended their payment processing procedures to ensure that transactions are processed in the order they are received, a practice that could reduce the number of overdrafts a customer must pay. 

But the lawmakers said Tuesday that the unevenness of industry-led reform underscores the need for a legislative solution.

“While I’m very pleased to see that some banks have finally taken the initiative to eliminate and reduce their fees, it’s concerning that it has taken so long for them to do so,” Maloney said. “We are working to put dollars back in consumers' pockets [and] keeping the fees from going to corporations and financial institutions.”  

Maloney’s bill was quietly pulled from a House Financial Services Committee markup hearing in late June, American Banker reported. But after Tuesday’s press conference, Maloney told a crowd gathered that she expected her bill to be taken up in a House Financial Services Committee markup later in July.  

The lawmakers declined to say whether they would attempt to attach the Overdraft Protection Act to a larger legislative vehicle, such as the must-pass National Defense Authorization Act, or try to pass the bill as a standalone measure — a much more difficult task for Democrats in a 50-50 Senate still limited by the 60-vote-threshold filibuster. 

But Warren suggested that the reforms contained in the Overdraft Protection Act were broadly popular. “This is a hard bill to vote against,” she said. “If we can actually get this thing on the floor, who wants to be the Republican who says, ‘It’s OK for giant banks to continue to squeeze hardworking families?’” 

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Advocates for retail bankers argue that overdraft fees are used responsibly by many Americans as a form of short-term credit, and that cracking down on the practice too harshly could force borrowers to seek more expensive forms of credit with fewer protections, such as payday loans, or risk a stop-payment order, which could hurt consumers’ credit. 

Warren, asked by American Banker whether there was anything the federal bank regulators could do to improve banks’ overdraft practices in the meantime as lawmakers push for the bill’s passage, encouraged consumers to send their overdraft complaints and other feedback to the Consumer Financial Protection Bureau. 

“This is a part of how Americans’ voices are heard,” Warren said. “Make a record of what your bank is doing. That helps build the case for why we need real change.” 

Maloney’s bill has been endorsed by a number of consumer advocacy organizations in the U.S., including Americans for Financial Reform, the Center for Responsible Lending, Consumer Federation of America, National Consumer Law Center, U.S. Public Interest Research Group and Unidos U.S. 

At the press conference, Center for Responsible Lending Senior Policy Counsel Nadine Chabrier told reporters that “high-cost overdraft fees compound the problems of financially vulnerable families, with Black and Latino checking account holders disproportionately harmed.

“Legislation from Congresswoman Maloney and from Senators Booker and Warren would provide consumers with much-needed relief by reining in the cost and frequency of overdraft fees,” Chabrier said. “Congress should pass these bills.”