The Consumer Bankers Association (CBA) sent a letter to the House Committee on Financial Services reiterating its longstanding opposition to H.R. 4277, the “Overdraft Protection Act.”
The Overdraft Protection Act would require banks to engage in increased disclosures as it relates to overdraft protection and overdraft fee programs. Under this law, failure to do so would be considered an unfair or deceptive act, thus opening the bank up to enforcement proceedings from the Consumer Financial Protection Bureau (CFPB).
The law also would place strict limits on the number of times a bank can charge a customer an overdraft fee each month and year. This would effectively limit the number of times a bank will allow a customer to overdraw their account before transactions are immediately declined.
The bill, as introduced, would also prohibit the application of overdraft fees if the overdraft is caused by a debit hold amount which exceeds the amount of the related transaction.
In its letter, the CBA said overdraft protection and fee programs were developed from the demands and desires of consumers and, as such, should not be subject to excessive rules and restrictions from the government.
The CBA also argues overdraft services act as a necessary and viable line of credit for consumers in need of short-term liquidity that they might not otherwise have access to.
“Banks have invested significant resources toward innovating overdraft services to provide access to safe, high-quality consumer products and services for consumers’ long-term benefit,” the letter concluded. “We encourage policymakers to reject the H.R. 4277 and prevent disruption for those most in need from getting emergency financial assistance.”