Congress May Fight Overdraft Fees

Today says a new bill in Congress targets the $32 billion a year banks rake in from overdraft fees – the money consumers pay when their accounts don’t have enough to cover all their transactions.

The government forced banks to make overdraft protection optional in 2010. Despite that, banks made $400 million more last year than in 2011 on those fees, which are often as high as $35-40 per bounced transaction. (Many have likely opted in without noticing or understanding.)

The new bill, called the Overdraft Protection Act of 2013, would make more changes. It would cap overdraft charges at one per month and six per year; require the fees to be “reasonable and proportional” to the underfunded amount; and it would prevent temporary holds (like when you check into a hotel) from triggering an overdraft.

It would also keep banks from stacking the deck against consumers by prioritizing the most expensive transactions first under the excuse that bigger transactions are more important. While that may sometimes be true, it also means that if the big charge sucks all the money out of your account, every pending little charge could cause an additional overdraft fee – regardless of the order the consumer made those transactions. (There’s enough blame to go around: Consumers should be responsible enough to know if a transaction could bounce, too.)

The legislation was introduced by two Democratic Representatives, Carolyn Maloney from New York and Maxine Waters from California. Maloney has tried to pass a similar bill before, and it didn’t work. Hopefully this one will.