The House Financial Services Committee had planned to mark up the legislation last week but pushed it back because it was busy with regulatory restructuring bills. The Senate Banking Committee held a hearing on the measure last week but hadn't scheduled a mark up on it and its immediate agenda focused on regulatory restructuring as well.
At last Tuesday's Senate committee hearing, Pentagon Federal Credit Union President/CEO Frank Pollack described how his credit union's overdraft protection program is completely opt-in, operates as a line of credit and the cost to consumer is fully disclosed and proportional to the amount of the overdraft.
He also explained that the credit union's program for military members allows it to waive fees for overdrafts twice over a three-month period. He said he is looking to expand that to all members.
At the hearing, Chairman Christopher Dodd (D-Conn.) said additional legislation is necessary because while "it is a responsibility each one of us has to manage our personal accounts as well as we possibly can and to spend within our means, but lending institutions often add overdraft coverage to consumer accounts without informing consumers or giving them a choice."
Dodd's bill, and a similar one sponsored by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Joint Economic Committee Chairman Carolyn Maloney (D-N.Y.), would require credit unions and banks to gain a member's or customer's permission before enrolling them in an overdraft protection program and could only charge fees once a month or six times per year.
Pollack did not address Dodd's legislation during his testimony, but both CUNA President/CEO Dan Mica and NAFCU President/CEO Fred Becker wrote letters to the panel opposing the bill.
Becker that the bill could "severely impact the ability of any credit unions to continue to operate and potentially force some of our smaller members to close their doors forever."
Mica wrote that if the bill were passed "credit union members would incur more nonsufficient fund fees with none of the benefits of having many transactions honored. They would pay more merchant return check fees and have more bad checks reported to consumer reporting agencies."
The trades also contend that legislation isn't needed because of regulations issued by the Federal Reserve, which ban credit unions and banks from charging overdraft fees at ATMs or one-time debit card transactions unless the consumer consents
or opts in.