Pentagon Federal Credit Union President/CEO Frank Pollack is scheduled to be one of five witnesses to testify at Tuesday's Senate Banking Committee hearing on legislation to restrict overdraft fees.
Pollack is slated to appear along with representatives of Citibank, two consumer groups and a private citizen from Connecticut, the home state of Senate Banking Committee Chairman Christopher Dodd, the sponsor of the legislation.
Dodd's legislation would require 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.
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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 also ban credit unions and banks from shifting the order of transactions to increase the frequency of overdrafts.
The legislation is similar to a bill proposed by House Financial Services Committee Chairman Barney Frank and Joint Economic Committee Chairman Carolyn Maloney. Frank's committee could begin marking up that legislation later this week.
Both bills go further than the regulations approved last Thursday by Federal Reserve, which bans credit unions and banks from charging overdraft fees at ATMs or on one-time debit card transactions unless the consumer consents, or "opts in."
CUNA and NAFCU oppose the legislation and contend lawmakers should wait to see the impact of the new regulations-which take effect next July 1-before adding to credit unions' regulatory burden. They also contend that the legislation could have the effect of ending overdraft protection programs because limiting the charges to six times year would make them not cost effective.
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