WASHINGTON (9/09/09)—Sen. Charles Schumer (D-N.Y.) announced Tuesday that he wants to see more consumer protections associated with overdraft protection plans and that he will back legislation targeting abusive practices. Speaking at The College of Saint Rose in his state’s capitol, Albany, Schumer said overdraft legislation should:
* Require that consumers either must opt in, or have a chance to opt out, of financial institutions’ overdraft protection programs; * Increase disclosure of the fees and APR charges on overdraft loans to help consumers factor in that information when choosing a debit card provider; * Require a warning to consumers that an electronic transaction may trigger an overdraft loan fee. The warning should be joined with a notice allowing the consumer to cancel the transaction after receiving this warning; * Prohibit financial institutions from manipulating the order in which checks and other debits are posted if it causes more overdrafts and maximizes fees; and * Require them to gradate fees proportionally so that a fee for a nickel overdraft is lower than a fee for a $100 overdraft.
Legislation that has been introduced in the House by another New York Democrat, Rep. Carolyn Maloney (H.R. 1456, the Consumer Overdraft Protection Fair Practices Act), carries the provisions listed above. Schumer said Tuesday that he will be an original co-sponsor for legislation being introduced in the Senate by Sen. Christopher Dodd (D-Conn.), who heads the Senate Banking Committee. The Credit Union National Association (CUNA) has adopted policy positions supporting the ability of credit unions to offer overdraft privilege programs, but urging credit unions to avoid unfair or deceptive practices, which are inconsistent with credit philosophy and principles.