Reps. Carolyn Maloney (D-N.Y.) and Maxine Waters (D-Calif.), along with 44 other co-sponsors, introduced a bill on Wednesday that would require bank customers to opt in to overdraft protection and would provide a number of other consumer protections for bank customers.
“Debit cards can now be used to pay for almost anything from dry cleaning to parking meters, and that makes everyday life more convenient,” Maloney said. “But the omnipresence of swipe-card terminals also make it easier than ever to overdraw an account and incur an overdraft fee without even knowing it. So a $5 cappuccino can become a $35 cappuccino in an instant.”
The bill would also require financial institutions to provide disclosures regarding overdraft coverage, ban the manipulation of transaction posting order to maximize fee income, require institutions to keep fees “reasonable and proportional” and would cap overdraft fees at one per month and six per year.
Bank of America announced in 2011 it would begin charging a $5 monthly fee to debit card customers, regardless of average balance or the number of monthly transactions, in response to the Durbin Amendment, a controversial cap on debit interchange—or swipe—fees. Public backlash, however, led the bank to drop the fee.
Other banks raised fees in other areas to account for reduction in interchange revenue, leading to a dwindling number of free checking options for consumers.
The legislation will expand the opt-in requirement to include ATM transactions, recurring monthly payments and paper checks.
“I am proud to be an original co-sponsor of this critical legislation to protect consumers from calculated strategies by some financial institutions to generate unfair overdraft fees,” Waters said. “The legislation introduced today is a common-sense bill which all Members of Congress should embrace. It is in the best tradition of true consumer protection.”