Consumer Groups Applaud Senator Dodd's Overdraft Reform Bill

Wed Oct 21, 2009 12:51pm EDT

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Center for Responsible Lending
Consumer Federation of America
Consumers Union
National Consumer Law Center, on behalf of its low-income clients
U.S. PIRG


WASHINGTON, Oct. 21 /PRNewswire-USNewswire/ -- Consumer groups strongly
support Senator Christopher Dodd for introducing a bill this week that would
curb many of the abusive overdraft practices of banks and credit unions. Those
practices now strip nearly $24 billion annually from checking accounts,
primarily from Americans living paycheck-to-paycheck.


The "Fairness and Accountability in Receiving Overdraft Coverage Act" ("FAIR
Act") that Dodd has proposed would require financial institutions to obtain
explicit permission from all their customers before enrolling them in a system
of fee-based overdraft coverage for debit card and ATM transactions.  This
action is long overdue and one that we hope the Federal Reserve also will take
later this year.


The bill also offers additional, major reforms that the Fed has failed to
propose, much less adopt.  In addition to requiring express consent--which
should be an essential, baseline protection for any credit product--the FAIR
Act would, among other protections:


    --  require that an overdraft fee charged on any transaction be reasonable
        and that its size bear some relationship to the cost of covering the
        overdraft;
    --  prohibit reordering of customer transactions to trigger otherwise
        avoidable overdraft fees;

    --  limit the number of overdraft fees per person to six a year and no
more
        than one a month.  At that point, financial institutions would have to
        enroll the consumer in a lower-cost program or stop charging for
        covering overdrafts.



We are pleased that this bill would put long-overdue brakes on abusive
overdraft practices by banks and credit unions, practices that make holding on
to and managing the money in their checking accounts difficult for many
Americans. We urge Congress to pass the FAIR Act as soon as possible.







SOURCE  Center for Responsible Lending

Kathleen Day of Center for Responsible Lending, +1-202-349-1871,
kathleen.day@responsiblelending.org
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