The U.S. House Committee on Financial Services voted to ship a invoice to the whole House of Representatives that may save you banks from charging too many overdraft charges.
The Overdraft Protection Act (H.R. 4277), authored through Rep. Carolyn Maloney, D-N.Y., mentioned that overdraft protection for a charge has grow to be extra prevalent with the larger utilization of debit playing cards.
“Many financial institutions market a range of overdraft options but aggressively encourage consumers to consent to the most expensive option, where a high flat fee is collected for every individual overdraft transaction,” the invoice mentioned.
The invoice states that every time a monetary establishment covers an overdraft, it fees an overdraft protection charge. This can come with more than one charges in at some point or further overdraft charges every day the account stays overdrawn. It mentioned those “abusive practices” deprive shoppers of monetary choices.
“It is the purpose of this Act to protect consumers by limiting abusive overdraft coverage fees and practices, and by providing meaningful disclosures and consumer choice in connection with overdraft coverage fees,” the invoice mentioned.
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LEGISLATORS SUPPORT BANK-LED END TO OVERDRAFT FEES
Consumer teams inspire House to move invoice
As the invoice strikes to the whole House of Representatives for attention, some person teams have applauded the committee’s efforts and inspired the House to move it.
“We applaud Congresswoman Maloney and the House Financial Services Committee on passing this critical legislation that will protect consumers from abusive overdraft fees,” Rachel Gittleman, the Consumer Federation of America’s (CFA) monetary products and services outreach supervisor, mentioned in a observation. “These fees are borne predominately by those who can least afford them and disproportionately fall on low-income consumers and consumers of color. Consumers cannot wait for banks to individually put an end to this practice – the cost is just too high.”
Some banks have already begun to finish overdraft and non-sufficient finances (NSF) charges on their very own.
Bank of America, Capital One and Citibank are amongst those who have both eradicated or lowered those charges and feature additionally carried out steadiness indicators for credit score and debit card transactions to let shoppers know when their to be had steadiness falls under a specific amount.
“We applaud Ally Bank, Bank of America, Capitol One, Citibank, and other banks that have either eliminated their overdraft fees or dramatically scaled them back in recent months. These banks’ overdraft fee reforms greatly benefit their customers,” Nadine Chabrier, the Center for Responsible Lending’s (CRL) senior coverage recommend, mentioned in a observation. “At the same time, many financial institutions continue abusive overdraft practices, and all consumers should have a baseline level of protection from this exploitation.
Chabrier also encouraged lawmakers to pass and send the bill to President Joe Biden.
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‘THE END OF OVERDRAFT FEES?’: LAWMAKERS, STAKEHOLDERS EXAMINE IMPACT ON CONSUMERS DURING FEDERAL HEARING
Expert says legislation is ‘misguided’
Although some groups have encouraged the House to pass this legislation, one expert called the overdraft bill “faulty,” and warned of its potential impact on vulnerable consumers.
“Today’s passage of the Overdraft ‘Protection’ Act within the House Financial Services Committee will hurt susceptible shoppers wanting emergency financing – making it tougher to hide surprising bills between paychecks,” Lindsey Johnson, Consumer Bankers Association (CBA) president and CEO, said in a statement. “This old-fashioned law disregards years of bank-led, consumer-driven innovation and can remove a monetary protection internet many households depend on in instances of want.
“Lawmakers understand the harmful consequences of this legislation, and it is our hope they will reject any further efforts to advance this misguided proposal and instead encourage more of the innovation banks are already delivering customers in every community they serve,” Johnson mentioned.
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