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Lawmakers urge Fed to tighten overdraft fees rules
Thu May 28, 2009 9:16pm EDT
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By John Poirier
WASHINGTON (Reuters) - Key U.S. House Democrats urged the Federal Reserve to issue rules requiring banks to obtain approval from customers before allowing them to overdraw from their bank accounts using debit cards and automatic teller machines, a step that could include a hefty fee.
"Consumers simply shouldn't be enrolled in overdraft programs without their consent," said U.S. Representative Carolyn Maloney, chairman of the congressional Joint Economic Committee.
The proposals, which were issued in December, would apply only to electronic fund transfers using debit cards and automatic teller machines.
The Federal Reserve is weighing new rules on possibly requiring banks to offer customers an opt-in to overdraft programs or whether an opt-out mechanism is sufficient.
Overdraft fees is the next segment of consumer protection lawmakers want to address, capitalizing on the successful passing of a comprehensive credit card bill through Congress amid consumer complaints of hidden fees and unexpected changes to their credit card terms and billing practices.
Maloney was instrumental in passing the reform bill that was signed into law last week. In it, credit card issuers are required to ask customers if they want to participate in the over-the-limit program which includes fees.
"Regulations should similarly require an opt-in to overdraft fees," she said.
Maloney, House Financial Services Committee Chairman Barney Frank and Luis Gutierrez, chairman of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, jointly signed a letter urging the Fed to fix what they called "abusive overdraft lending."
In the May 27 letter, they also urged the Fed to prohibit banks from posting transactions in a sequence that maximizes overdraft fees for banks.
Lawmakers and consumer groups have complained that consumers have been hit with fees, sometimes as high as $30 for each transaction after going over their account limit.
They have accused banks of manipulating the sequence of transactions to impose fees on additional transactions already over the customer's borrowing limit.
In March Maloney introduced legislation aimed at addressing the same concerns expressed in the letter to the Fed.
The comment period for the Fed's proposals closed on March 30. The Federal Reserve has not indicated when it might issue rules on overdraft fees but after evaluating public comments and conducting additional consumer testing, the Fed is expect to issue a final rule later this year.
(Reporting by John Poirier; editing by Carol Bishopric)
Thu May 28, 2009 9:16pm EDT
Email | Print | Share
| Reprints | Single Page
[-] Text [+]
By John Poirier
WASHINGTON (Reuters) - Key U.S. House Democrats urged the Federal Reserve to issue rules requiring banks to obtain approval from customers before allowing them to overdraw from their bank accounts using debit cards and automatic teller machines, a step that could include a hefty fee.
"Consumers simply shouldn't be enrolled in overdraft programs without their consent," said U.S. Representative Carolyn Maloney, chairman of the congressional Joint Economic Committee.
The proposals, which were issued in December, would apply only to electronic fund transfers using debit cards and automatic teller machines.
The Federal Reserve is weighing new rules on possibly requiring banks to offer customers an opt-in to overdraft programs or whether an opt-out mechanism is sufficient.
Overdraft fees is the next segment of consumer protection lawmakers want to address, capitalizing on the successful passing of a comprehensive credit card bill through Congress amid consumer complaints of hidden fees and unexpected changes to their credit card terms and billing practices.
Maloney was instrumental in passing the reform bill that was signed into law last week. In it, credit card issuers are required to ask customers if they want to participate in the over-the-limit program which includes fees.
"Regulations should similarly require an opt-in to overdraft fees," she said.
Maloney, House Financial Services Committee Chairman Barney Frank and Luis Gutierrez, chairman of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, jointly signed a letter urging the Fed to fix what they called "abusive overdraft lending."
In the May 27 letter, they also urged the Fed to prohibit banks from posting transactions in a sequence that maximizes overdraft fees for banks.
Lawmakers and consumer groups have complained that consumers have been hit with fees, sometimes as high as $30 for each transaction after going over their account limit.
They have accused banks of manipulating the sequence of transactions to impose fees on additional transactions already over the customer's borrowing limit.
In March Maloney introduced legislation aimed at addressing the same concerns expressed in the letter to the Fed.
The comment period for the Fed's proposals closed on March 30. The Federal Reserve has not indicated when it might issue rules on overdraft fees but after evaluating public comments and conducting additional consumer testing, the Fed is expect to issue a final rule later this year.
(Reporting by John Poirier; editing by Carol Bishopric)
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