Overdraft reform bill set aside by House panel, sources say

WASHINGTON — A bill to introduce new limits on banks’ overdraft practices was quietly pulled before being voted on during a House Financial Services Committee hearing on Wednesday, according to two sources familiar with the decision.

The bill, titled the Overdraft Protection Act and sponsored by Rep. Carolyn Maloney, D-N.Y.,  would include a monthly cap on the number of times such fees could be charged to customers and require that customers opt in to banks’ overdraft programs, rather than opt out. 

But Wednesday's markup hearing — at which 10 bills were voted on or discussed — ended in the late afternoon without any discussion of the Overdraft Protection Act. And although the markup session will continue Thursday afternoon with a handful of postponed committee votes from Wednesday, two sources said the overdraft reform bill had been removed from consideration. 

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The committee has four more Democrats than Republicans. But Maloney’s bill did not have enough Democratic votes to clear the committee, said one of the sources, who requested anonymity in order to discuss the situation candidly. 

"Protecting consumers has never been easy," Maloney said in a statement to American Banker. "It wasn’t easy when we passed my Credit Cardholders Bill of Rights and it won’t be easy now, but I am determined to see this through and get [the overdraft bill] over the finish line in the near future."

Maloney pointed to research from the Consumer Financial Protection Bureau that found 80% of overdraft fees are paid by just 9% of consumers, adding: "Congress needs to stand with the consumers who are unfairly targeted by these fees.”

A spokesperson for committee Chair Maxine Waters, D-Calif., did not respond to comment on Wednesday afternoon. 

Democrats have taken an increasingly sharp interest in banks’ overdraft practices in recent months, and many banks have pared back or eliminated their overdraft programs. But retail bank advocates and some Republicans have pushed back against a crackdown on overdraft fees, saying that many American rely on overdrafts as a form of short-term credit that’s cheaper than payday lending.