Warren, Booker Reintroduce Bill to Crack Down on Bank Overdraft Fees
Overdraft fees disproportionately fall on customers who are least able to afford them
WASHINGTON, D.C. — United States Senators Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.) reintroduced legislation to crack down on exploitative overdraft fees that banks charge consumers when they make a purchase or pay a bill, but don’t have sufficient funds in their account.
The Stop Overdraft Profiteering Act of 2021 would ban overdraft fees on debit card transactions and ATM withdrawals, and limit fees placed for checks and recurring payments. It would also mandate that banks post transactions in a manner that minimizes overdraft and nonsufficient fund fees (often times, banks reorder transactions in such a way as to maximize overdraft fees, which can mean, in some cases, that the consumer faces multiple charges).
"While the COVID-19 pandemic has swept across the country and millions of families have struggled financially, big banks have reaped in billions of profits made from overdraft fees," said Senator Warren. “I am glad to introduce this critical legislation with Senator Booker to protect consumers and crackdown on these predatory practices.”
“Exploitative and excessive overdraft fees allow banks to reap enormous profits at the expense of the most economically vulnerable people,” said Senator Booker. “Even when accounting for the temporary and uneven measures that the industry took to provide relief to consumers throughout the pandemic, banks continued to make billions of dollars of revenue last year on the backs of their most vulnerable consumers. Our bill will require banks to institute overdraft protections and transparency measures that protect consumers and put an end to the unfair practices that can often be the tipping point toward financial ruin for struggling families. Families emerging from this crisis cannot continue to be saddled by these burdensome and abusive practices.”
The Stop Overdraft Profiteering Act of 2021 would:
- Prohibit overdraft fees on debit card transactions and ATM withdrawals.
- Prohibit financial institutions from charging more than one overdraft fee per month and no more than six overdraft fees in any single calendar year for check and recurring bill payment overdrafts.
- Limit check and recurring bill payment overdrafts fees and non-sufficient fund fees to an amount that is reasonable and proportional to the financial institution’s costs in providing the overdraft coverage.
- Mandate a three-day waiting period between when an individual opens a new account and when a financial institution may offer overdraft protection.
- Mandate that depository institutions post transactions in a manner that minimizes overdraft and non-sufficient fund fees.
- Increase other consumer disclosures related to overdraft coverage programs.
The legislation is endorsed by the Center for Responsible Lending and Americans for Financial Reform.
Senator Warren has been a longtime advocate for consumer protections and to hold big banks accountable for predatory practices.
- In May 2021, Senator Warren slammed the CEOs of four of the nation's largest banks -- JPMorgan, Wells Fargo & Co, Citi, and Bank of America -- for taking a collective $4 billion in overdraft fees from people during the pandemic. Senator Warren also urged the CEOs to refund the billions they took from struggling consumers during the pandemic: not agreed to do so.
- In July 2020, Senators Warren and Brian Schatz (D-Hawaii.) sent a letter to Charles W. Schaft, Chief Executive Officer and President of Wells Fargo, following reports about the bank placing borrowers who are not delinquent on their loans in mortgage forbearance programs without their consent and putting consumers at risk of greater financial hardship in the midst of one of the worst economic collapses in history.
- In 2018, Senators Warren and Booker sent a letter to the Consumer Financial Protection Bureau questioning its plan to no longer pursue regulatory action on overdraft fees after it failed to mention action in its most recent regulatory agenda filing, even though it had been on the Bureau’s agenda for four years.
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