Credit unions and banks would have 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 in legislation introduced today by Senate Banking Committee Chairman Christopher Dodd (D-Conn.)
Other provisions include: Fees would have to be proportional to the processing costs, customers would have to be notified when they overdraw their account and a customer must be warned if a transaction will cause them to overdraw their account.
It would ban credit unions and banks from shifting the order of transactions to increase the frequency of overdrafts.
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"This legislation gives Americans control over their bank accounts-giving them the chance to choose whether they want overdraft protection, establishing strict limits on these fees, and shining more light on these practices," Dodd said in a statement.
CUNA and NAFCU contend the opt-in requirement would add to credit unions' regulatory burden and instead prefer an opt-out provision. They also express concern that placing overdraft protection programs under the Truth in Lending Act would cause fees to be treated as finance charges, thus resulting in the annual percentage rate exceeding 18%, thus violating the federal credit union usury ceiling.
Rep. Carolyn Maloney (D-N.Y.) has introduced a similar measure in the House.
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