HR 1456 IHCommentsClose CommentsPermalink

To extend the protections of the Truth in Lending Act to overdraft protection programs and services provided by depository institutions, to require customer consent before a depository institution may initiate overdraft protection services and fees, to enhance the information made available to consumers relating to overdraft protection services and fees, to prohibit systematic manipulation in the posting of checks and other debits to a depository account for the purpose of generating overdraft protection fees, and for other purposes.CommentsClose CommentsPermalink

March 12, 2009CommentsClose CommentsPermalink

Mrs. MALONEY (for herself, Mr. ACKERMAN, Mr. MILLER of North Carolina, Mr. ELLISON, Ms. SPEIER, Mr. TIERNEY, and Ms. ESHOO) introduced the following bill; which was referred to the Committee on Financial ServicesCommentsClose CommentsPermalink

To extend the protections of the Truth in Lending Act to overdraft protection programs and services provided by depository institutions, to require customer consent before a depository institution may initiate overdraft protection services and fees, to enhance the information made available to consumers relating to overdraft protection services and fees, to prohibit systematic manipulation in the posting of checks and other debits to a depository account for the purpose of generating overdraft protection fees, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Consumer Overdraft Protection Fair Practices Act’.CommentsClose CommentsPermalink

SEC. 2. RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS OR SERVICES.

(a) Truth in Lending Act Amendments-CommentsClose CommentsPermalink





(1) DEFINITION- Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(cc) Terms Relating to Short-Term Extensions of Credit Under Overdraft Protection Programs-CommentsClose CommentsPermalink





‘(1) OVERDRAFT PROTECTION FEE- The term ‘overdraft protection fee’ means any fee or charge imposed in connection with any account on which checks or other debits are paid by the institution in which such account is held even though there are insufficient funds in the account to cover such checks or other debits, unless such fee or charge--CommentsClose CommentsPermalink





‘(A) is imposed on an incidental basis as a customer accommodation and no more than 3 such overdraft fees are imposed during any calendar year;CommentsClose CommentsPermalink





‘(B) is imposed in connection with an extension of credit through an overdraft line of credit program where such fee or charge was considered a finance charge under this title, as in effect immediately prior to the enactment of the Consumer Overdraft Protection Fair Practices Act; orCommentsClose CommentsPermalink





‘(C) has been disclosed in connection with a program under which the overdraft is covered by funds transferred from another deposit, share, or other asset account.CommentsClose CommentsPermalink





‘(2) OTHER TERMS-CommentsClose CommentsPermalink





‘(A) CHECK- The term ‘check’ has the same meaning as in section 3(6) of the Check Clearing for the 21st Century Act.CommentsClose CommentsPermalink





‘(B) OTHER DEBITS- The term ‘other debits’ includes withdrawals from an account by the consumer through an automated teller machine and electronic fund transfers from an account that are initiated or authorized by the consumer.CommentsClose CommentsPermalink





‘(C) ELECTRONIC FUND TRANSFER- The term ‘electronic fund transfer’ has the same meaning as in section 903.CommentsClose CommentsPermalink





‘(D) ACCOUNT- The term ‘account’ means any account intended for use by and generally used by a consumer primarily for personal, family, or household purposes into which the consumer deposits funds.CommentsClose CommentsPermalink





‘(E) TRANSACTION ACCOUNT- The term ‘transaction account’ has the same meaning as in section 19(b)(1)(C) of the Federal Reserve Act.’.CommentsClose CommentsPermalink





(2) RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS OR SERVICES-CommentsClose CommentsPermalink





(A) IN GENERAL- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by adding at the end the following new section:CommentsClose CommentsPermalink

‘Sec. 140A. Restrictions on overdraft protection programs or services

‘(a) In General- In the case of any transaction account of a consumer at any institution, no overdraft protection fee may be imposed on such account for any extension of funds by the institution to cover any check or other debit for which there are insufficient funds in the consumer’s account to pay such check or other debit, unless--CommentsClose CommentsPermalink





‘(1) the consumer has provided specific written consent to any program or service that provides for charging of such fees in connection with any such extension of funds;CommentsClose CommentsPermalink





‘(2) such fee is imposed pursuant to the terms of a written agreement with the consumer which discloses, in a clear and conspicuous manner--CommentsClose CommentsPermalink





‘(A) the amount of any fee imposed in connection with paying an overdraft;CommentsClose CommentsPermalink





‘(B) any applicable disclosure required by this title in connection with such extension of credit, including the disclosures required by section 127;CommentsClose CommentsPermalink





‘(C) the categories of transactions for which a fee for payment of an overdraft may be imposed, including whether an overdraft created by withdrawals at automated teller machines or other electronic fund transfers will be covered and a fee imposed;CommentsClose CommentsPermalink





‘(D) the time period by which the consumer must repay or cover any extension of credit in the form of payment of an overdraft; andCommentsClose CommentsPermalink





‘(E) the circumstances under which the institution in which an account is held will not pay an overdraft; andCommentsClose CommentsPermalink





‘(F) other information required to be disclosed by regulation;CommentsClose CommentsPermalink





‘(3) such fee is separately and conspicuously disclosed, each time the fee is imposed, in any periodic statement provided to the consumer with respect to such account and is included in the calculation of the annual percentage rate as required by sections 107 and 127(b)(6).CommentsClose CommentsPermalink





‘(b) Clarification Relating to Overdraft Fees- In the case of any transaction account of a consumer at any institution, the prohibition against an overdraft protection fee under subsection (a) shall apply regardless of whether the amount of such fee is the same as, or less than, any fee imposed by the institution with respect to such account for a check or other debit that is returned unpaid.CommentsClose CommentsPermalink





‘(c) Prohibition on Misrepresentations- If any institution--CommentsClose CommentsPermalink





‘(1) will not extend funds under specific circumstances to cover an overdraft in any transaction account of a consumer at the institution; orCommentsClose CommentsPermalink





‘(2) reserves the right to extend funds to pay any such overdraft on a discretionary basis,CommentsClose CommentsPermalink





any representation by such institution that the institution will extend credit to cover all overdrafts on such account shall be a violation of this title.’.CommentsClose CommentsPermalink





(B) CLERICAL AMENDMENT- The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 140 the following new item:CommentsClose CommentsPermalink





‘140A. Restrictions on overdraft protection programs or services.’.CommentsClose CommentsPermalink





(3) RESTRICTIONS ON ADVERTISING OF OVERDRAFT PROTECTION PROGRAMS OR SERVICES-CommentsClose CommentsPermalink





(A) IN GENERAL- Chapter 3 of the Truth in Lending Act (15 U.S.C. 1661 et seq.) is amended by adding at the end the following new section:CommentsClose CommentsPermalink

‘Sec. 148. Restrictions on advertising of overdraft protection programs or services

‘(a) In General- In the case of an institution that maintains transaction accounts for consumers and offers a program or service under which the institution pays any overdraft on the account in exchange for payment of an overdraft protection fee, the institution may not make any of the following representations or statements with respect to such program or service in any advertisement or promotion:CommentsClose CommentsPermalink





‘(1) Any representation or statement describing a transaction account as free or no cost if the account includes, or is promoted as including, overdraft protection services that involve the payment of overdraft protection fees.CommentsClose CommentsPermalink





‘(2) Any representation or statement encouraging use of the account as a service to meet short-term credit needs or to obtain advances on a consumer’s next payment of salary, wages, benefits, or other income.CommentsClose CommentsPermalink





‘(3) Any representation or statement that the financial institution will honor all checks or other debits presented against the account, if the institution retains discretion at any time not to honor any check or other debit presented.CommentsClose CommentsPermalink





‘(b) Regulations- The Board shall prescribe regulations implementing the restrictions set forth in subsection (a) pursuant to the authority of the Board under section 18(f) of the Federal Trade Commission Act, and may, by regulation or order, restrict such additional acts or practices that the Board finds to be unfair or deceptive in connection with the offering, operation, and advertising of overdraft protection programs and services.’.CommentsClose CommentsPermalink





(B) CLERICAL AMENDMENT- The table of sections for chapter 3 of the Truth in Lending Act is amended by inserting after the item relating to section 147 the following new item:CommentsClose CommentsPermalink





‘148. Restrictions on advertising of overdraft protection programs or services.’.CommentsClose CommentsPermalink





(4) CLARIFICATION OF FINANCE CHARGE- Section 106(a) of the Truth in Lending Act (15 U.S.C. 1605(a)) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





‘(7) Overdraft protection fee.’.CommentsClose CommentsPermalink





(b) Electronic Fund Transfer Act Amendments- Section 904 of the Electronic Fund Transfer Act (15 U.S.C. 1693b) is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(e) Restrictions on Overdraft Protection Services and Fees-CommentsClose CommentsPermalink





‘(1) IN GENERAL- A financial institution that holds a consumer’s account may not impose an overdraft protection fee on the account in connection with any payment of an electronic fund transfer initiated by the consumer at an automated teller machine in spite of a lack of sufficient funds in the consumer’s account to pay such electronic fund transfer, unless--CommentsClose CommentsPermalink





‘(A) the consumer has affirmatively requested such service pursuant to section 140(a)(1), including specific consent to allowing overdrafts at an automated teller machine or by debit card at a point-of-sale terminal;CommentsClose CommentsPermalink





‘(B) the financial has provided a notice to the consumer after the transaction is initiated and before the consumer is irrevocably committed to completing the transaction, that the electronic fund transfer the consumer has requested will result in an overdraft protection fee, together with the amount of any such fee;CommentsClose CommentsPermalink





‘(C) the consumer elects to continue in the manner necessary to effect the requested electronic fund transfer after receiving such notice; andCommentsClose CommentsPermalink





‘(D) the overdraft protection fee imposed in connection with such transaction is clearly disclosed in the written documentation of the electronic fund transfer required by section 906(a).CommentsClose CommentsPermalink





‘(2) PROHIBITION ON FEE IN ABSENCE OF NOTICE- If the notice required by paragraph (1)(B) is not feasible, the financial institution may not charge an overdraft protection fee in connection with any payment of an electronic fund transfer initiated by the consumer at an automated teller machine or by debit card at a point-of-sale terminal in spite of a lack of sufficient funds in the consumer’s account to pay such electronic fund transfer.CommentsClose CommentsPermalink





‘(3) DISCLOSURE OF ACCOUNT BALANCES- In the case of any financial institution that offers a program or service under which the institution pays any overdraft on a consumer’s account in exchange for the imposition of an overdraft protection fee in accordance with paragraph (1), the financial institution shall, in response to a balance inquiry initiated by the consumer at an automated teller machine operated by the financial institution, disclose only the actual dollar balance in the consumer’s account at the time of the request, which shall not include any additional amount of credit or overdraft protection the financial institution will pay under any agreement with the consumer that permits the imposition of the overdraft protection fee.CommentsClose CommentsPermalink





‘(4) OVERDRAFT PROTECTION FEE DEFINED- For purposes of this subsection, the term ‘overdraft protection fee’ has the same meaning as in section 103(cc)(1).’.CommentsClose CommentsPermalink





(c) Expedited Funds Availability Act Amendments-CommentsClose CommentsPermalink





(1) DEFINITION- Section 602 of the Expedited Funds Availability Act (12 U.S.C. 4001) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





‘(26) OVERDRAFT PROTECTION FEE- The term ‘overdraft protection fee’ has the same meaning as in section 103(cc)(1) of the Truth in Lending Act.’.CommentsClose CommentsPermalink





(2) RESTRICTIONS ON OVERDRAFT PROTECTION FEES- Section 607 of the Expedited Funds Availability Act (12 U.S.C. 4006) is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(f) Restrictions on Overdraft Protection Fees- A depository institution may not--CommentsClose CommentsPermalink





‘(1) impose an overdraft protection fee on an account at such institution for paying any check drawn on the account in spite of a lack of sufficient funds in the account to pay such check or any similar activity unless the accountholder has affirmatively requested such service pursuant to section 140(a)(1) of the Truth in Lending Act; orCommentsClose CommentsPermalink





‘(2) engage in a pattern or practice of delaying the posting of any deposit in an account, or manipulating the process of posting any check or other debit against an account, if such pattern or practice results in 1 or more overdrafts that trigger payment by the accountholder of an overdraft protection fee.’.CommentsClose CommentsPermalink