[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5691 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 5691

  To amend the Truth in Lending Act to establish fair and transparent 
practices related to the marketing and provision of overdraft coverage 
      programs at depository institutions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 9, 2012

Mrs. Maloney (for herself, Mr. Frank of Massachusetts, Mr. Capuano, Mr. 
    Ellison, Mr. Gutierrez, Mr. Moran, Mr. Jackson of Illinois, Ms. 
 Richardson, Mr. Van Hollen, Mr. Serrano, Mr. Cicilline, Mr. Dingell, 
Mr. Miller of North Carolina, Mr. Rangel, Ms. Chu, Ms. Schakowsky, Mr. 
Grijalva, Mr. Blumenauer, Mr. Carson of Indiana, Ms. Hahn, Ms. Kaptur, 
  Mr. Nadler, Mr. Conyers, Mr. Thompson of Mississippi, Ms. Brown of 
Florida, Mr. Cummings, Ms. Eshoo, Mr. Gonzalez, Ms. Norton, Ms. Lee of 
California, Ms. DeLauro, Ms. Wilson of Florida, Ms. Loretta Sanchez of 
California, Ms. Woolsey, Mrs. Lowey, Mr. Towns, Ms. Waters, Mr. Tonko, 
Mr. Rush, Mr. Ackerman, Mr. Hinchey, Mr. Stark, Mr. Holt, Mr. Pallone, 
 Ms. Tsongas, Mr. Becerra, and Ms. Bass of California) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
  To amend the Truth in Lending Act to establish fair and transparent 
practices related to the marketing and provision of overdraft coverage 
      programs at depository institutions, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Overdraft Protection Act of 2012''.

SEC. 2. FINDINGS AND PURPOSE.

    Section 102 of the Truth in Lending Act (15 U.S.C. 1601) is amended 
by adding at the end the following new subsection:
    ``(c) Fairness and Accountability in Overdraft Coverage.--
            ``(1) Findings.--The Congress also finds that--
                    ``(A) overdraft coverage is a form of short-term 
                credit that depository institutions provide for 
                consumer transaction accounts. Historically, depository 
                institutions covered overdrafts for a fee on an ad hoc 
                basis;
                    ``(B) with the growth in specially designed 
                software programs and in consumer use of debit cards, 
                overdraft coverage for a fee has become more prevalent;
                    ``(C) many depository institutions offer 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;
                    ``(D) most depository institutions collect a high 
                flat fee, including for small dollar transactions, each 
                time the institution covers an overdraft, in some cases 
                impose multiple overdraft coverage fees within a single 
                day, and many charge additional fees for each day 
                during which the account remains overdrawn; and
                    ``(E) such abusive practices in connection with 
                overdraft coverage fees have deprived consumers of 
                meaningful choices about their accounts and placed 
                significant financial burdens on low- and moderate-
                income consumers.
            ``(2) Purpose.--It is the purpose of this title 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.''.

SEC. 3. DEFINITIONS.

    (a) Additional Definitions.--Section 103 of the Truth in Lending 
Act (15 U.S.C. 1602) is amended by adding at the end the following new 
subsection:
    ``(ee) Definitions Relating to Overdraft Coverage.--
            ``(1) Check.--The term `check' has the same meaning as in 
        section 3(6) of the Check Clearing for the 21st Century Act (12 
        U.S.C. 5001 et seq.), other than a travelers check.
            ``(2) Depository institution.--The term `depository 
        institution' has the same meaning as in clauses (i) through 
        (vi) of section 19(b)(1)(A) of the Federal Reserve Act (12 
        U.S.C. 461(b)(1)(A)).
            ``(3) Nonsufficient fund fee.--The term `nonsufficient fund 
        fee' means a fee or charge assessed in connection with an 
        overdraft for which a depository institution declines payment.
            ``(4) Overdraft.--The term `overdraft' means, in a 
        withdrawal by check or other debit from a transaction account 
        in which there are insufficient or unavailable funds in the 
        account to cover such check or debit, the amount of such 
        withdrawal that exceeds the available funds in the account.
            ``(5) Overdraft coverage.--The term `overdraft coverage' 
        means the payment of a check presented or other debit posted 
        against a transaction account by the depository institution in 
        which such account is held, even though there are insufficient 
        or unavailable funds in the account to cover such checks or 
        other debits.
            ``(6) Overdraft coverage fee.--The term `overdraft coverage 
        fee' means any fee or charge assessed in connection with 
        overdraft coverage, or in connection with any negative account 
        balance that results from overdraft coverage, unless such fee 
        or charge is imposed in connection with--
                    ``(A) 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 
                Overdraft Protection Act of 2012; or
                    ``(B) any transfer from an account linked to 
                another transaction account.
        Such fee shall be considered a `finance charge' for purposes of 
        section 106(a), but shall not be included in the calculation of 
        the rate of interest for purposes of section 107(5)(A)(vi) of 
        the Federal Credit Union Act (12 U.S.C. 1757(5)(A)(vi)).
            ``(7) Overdraft coverage program.--The term `overdraft 
        coverage program' means a service under which a depository 
        institution assesses an overdraft coverage fee for overdraft 
        coverage.
            ``(8) Transaction account.--The term `transaction account' 
        has the same meaning as in section 19(b)(1)(C) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(C)).''.
    (b) Conforming Amendment.--Section 107(5)(A)(vi) of the Federal 
Credit Union Act (12 U.S.C. 1757(5)(A)(vi)) is amended by inserting ``, 
other than an overdraft coverage fee, as defined in section 103(ee) of 
the Truth in Lending Act (12 U.S.C. 1602(ee))'' after ``inclusive of 
all finance charges''.

SEC. 4. FAIR MARKETING AND PROVISION OF OVERDRAFT COVERAGE PROGRAMS.

    (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:
``Sec. 140B. Overdraft coverage program disclosures and consumer 
              protection
    ``(a) Prohibitions.--No depository institution may engage in acts 
or practices in connection with the marketing of or the provision of 
overdraft coverage that are unfair, deceptive, or designed to evade the 
provisions of this section.
    ``(b) Marketing Disclosures.--Each depository institution that 
provides or offers to provide overdraft coverage with respect to 
transaction accounts held at that depository institution shall clearly 
and conspicuously disclose in all marketing materials for such 
overdraft coverage--
            ``(1) any overdraft coverage fees with respect to such 
        overdraft coverage; and
            ``(2) that by not opting-in to such overdraft coverage--
                    ``(A) a consumer's transaction may be declined if 
                there are insufficient funds in the related transaction 
                account; and
                    ``(B) the consumer will not be charged a fee if 
                such transaction is declined.
    ``(c) Consumer Consent Opt-in.--A depository institution may charge 
overdraft coverage fees with respect to the use of an automatic teller 
machine or point of sale transaction only if the consumer has consented 
in writing, in electronic form, or in such other form as is permitted 
under regulations of the Bureau.
    ``(d) Consumer Disclosures.--Each depository institution shall 
clearly disclose to each consumer covered by an overdraft protection 
program of that depository institution--
            ``(1) that--
                    ``(A) the consumer may be charged for not more than 
                one overdraft coverage fee in any single calendar month 
                and not more than 6 overdraft coverage fees in any 
                single calendar year, per transaction account; and
                    ``(B) the depository institution retains the 
                discretion to pay (without assessing an overdraft 
                coverage fee) or reject overdrafts incurred by the 
                consumer beyond the numbers described in subparagraph 
                (A);
            ``(2) the overdraft coverage fee as an annual percentage 
        rate, so as to permit consumers to meaningfully compare the 
        overdraft coverage to alternative forms of overdraft options 
        and other sources of credit;
            ``(3) information about any alternative overdraft products 
        that are available (such as linked accounts, lines of credit, 
        and alerts), including a clear explanation of how the terms and 
        fees for such alternative services and products differ; and
            ``(4) such other information as the Bureau may require, by 
        rule.
    ``(e) Periodic Statements.--Each depository institution that offers 
an overdraft coverage program shall, in each periodic statement for any 
transaction account that has an overdraft coverage program feature, 
clearly disclose to the consumer the dollar amount of all overdraft 
coverage fees and nonsufficient fund fees charged to the consumer for 
the relevant period and year to date.
    ``(f) Exclusion From Account Balance Information.--No depository 
institution may include the amount available under the overdraft 
coverage program of a consumer as part of the transaction account 
balance of that consumer.
    ``(g) Prompt Notification.--Each depository institution shall 
promptly notify consumers, through a reasonable means selected by the 
consumer, when overdraft coverage has been accessed with respect to the 
account of the consumer, not later than on the day on which such access 
occurs, including--
            ``(1) the date of the transaction;
            ``(2) the type of transaction;
            ``(3) the overdraft amount;
            ``(4) the overdraft coverage fee;
            ``(5) the amount necessary to return the account to a 
        positive balance; and
            ``(6) whether the participation of a consumer in an 
        overdraft coverage program will be terminated if the account is 
        not returned to a positive balance within a given time period.
    ``(h) Terminated or Suspended Coverage.--Each depository 
institution shall provide prompt notice to the consumer, using a 
reasonable means selected by the consumer, if the institution 
terminates or suspends access to an overdraft coverage program with 
respect to an account of the consumer, including a clear rationale for 
the action.
    ``(i) Overdraft Coverage Fee Limits.--
            ``(1) Notice and opportunity to cancel.--Each depository 
        institution shall--
                    ``(A) warn any consumer covered by an overdraft 
                coverage program who engages in a transaction through 
                an automated teller machine or a branch teller if 
                completing the transaction would trigger overdraft 
                coverage fees, including the amount of the fees; and
                    ``(B) provide to the consumer the opportunity to 
                cancel the transaction before it is completed.
            ``(2) Frequency.--A depository institution may charge not 
        more than one overdraft coverage fee in any single calendar 
        month, and not more than 6 overdraft coverage fees in any 
        single calendar year, per transaction account.
            ``(3) Reasonable and proportional overdraft coverage 
        fees.--
                    ``(A) In general.--The amount of any overdraft 
                coverage fee that a depository institution may assess 
                for paying a transaction (including a check or other 
                debit) shall be reasonable and proportional to the 
                amount of the overdraft.
                    ``(B) Safe harbor rule authorized.--The Bureau, in 
                consultation with the Board of Governors of the Federal 
                Reserve System, Comptroller of the Currency, the Board 
                of Directors of the Federal Deposit Insurance 
                Corporation, and the National Credit Union 
                Administration Board, may issue rules to provide an 
                amount for any overdraft coverage fee that is presumed 
                to be reasonable and proportional the amount of the 
                overdraft.
            ``(4) Posting order.--In order to minimize overdraft 
        coverage fees charged to consumers, each depository institution 
        shall post transactions with respect to transaction accounts in 
        such a manner that the consumer does not incur avoidable 
        overdraft coverage fees.
    ``(j) Debit Holds.--No depository institution may charge an 
overdraft coverage fee on any category of transaction, if the overdraft 
results solely from a debit hold amount placed on a transaction account 
that exceeds the actual dollar amount of the transaction.
    ``(k) Nondiscrimination for Not Opting In.--In implementing the 
requirements of this section, each depository institution shall provide 
to consumers who have not consented to participate in an overdraft 
coverage program, transaction accounts having the same terms, 
conditions, or other features as those that are provided to consumers 
who have consented to participate in such overdraft coverage program, 
except for features of such overdraft coverage.
    ``(l) Nonsufficient Fund Fee Limits.--No depository institution may 
charge any nonsufficient fund fee with respect to--
            ``(1) any transaction at an automated teller machine; or
            ``(2) any debit card transaction.
    ``(m) Reports to Consumer Reporting Agencies.--No depository 
institution may report negative information regarding the use of 
overdraft coverage by a consumer to any consumer reporting agency (as 
that term is defined in section 603 of the Fair Credit Reporting Act 
(15 U.S.C. 1681a)) when the overdraft amounts and overdraft coverage 
fees are repaid under the terms of an overdraft coverage program.
    ``(n) Prepaid Card Study and Rulemaking.--
            ``(1) Study.--
                    ``(A) In general.--The Bureau shall carry out a 
                study on whether consumers are being subjected to 
                abusive practices with respect to prepaid card 
                overdraft coverage.
                    ``(B) Report.--Not later than 1 year after the date 
                of the enactment of this section, the Bureau shall 
                issue a report to the Congress on all findings and 
                determinations made in carrying out the study required 
                under subparagraph (A).
            ``(2) Rulemaking.--If the Bureau, in carrying out the study 
        required under paragraph (1)(A), determines that consumers are 
        being subjected to abusive practices with respect to prepaid 
        card overdraft coverage, the Bureau may, to the extent the 
        Bureau determines appropriate, apply the provisions of this 
        section to prepaid card overdraft coverage to the same extent 
        such provisions apply to overdraft coverage offered by 
        depository institutions.
            ``(3) Definitions.--For purpose of this section:
                    ``(A) Prepaid card.--The term `prepaid card' has 
                the meaning given the term general-use prepaid card 
                under section 915(a)(2)(A) of the Electronic Fund 
                Transfer Act.
                    ``(B) Prepaid card overdraft coverage.--The term 
                `prepaid card overdraft coverage' means the payment of 
                a charge posted against a prepaid card--
                            ``(i) where the prepaid card has 
                        insufficient or unavailable funds with which to 
                        cover such payment; and
                            ``(ii) where a fee or other charge is 
                        assessed against the consumer in connection 
                        with such payment.
    ``(o) Rule of Construction.--No provision of this section may be 
construed as prohibiting a depository institution from retaining the 
discretion to pay, without assessing an overdraft coverage fee or 
charge, an overdraft incurred by a consumer.''.
    (b) Technical Amendment.--The table of contents for chapter II of 
the Truth in Lending Act is amended by inserting after the item 
relating to section 140A the following new item:

``140B. Overdraft coverage program disclosures and consumer 
                            protection.''.

SEC. 5. REGULATORY AUTHORITY OF THE BUREAU.

    Not later than 24 months after the date of the enactment of this 
Act, the Bureau of Consumer Financial Protection (hereafter in this Act 
referred to as the ``Bureau'') shall issue such final rules and publish 
such model forms as necessary to carry out section 140B of the Truth in 
Lending Act, as added by this Act.

SEC. 6. EFFECTIVE DATE.

    (a) In General.--This Act and the amendments made by this Act shall 
take effect 1 year after the date of the enactment of this Act, whether 
or not the rules of the Bureau under this Act or such amendments are 
prescribed in final form.
    (b) Prepaid Card Study To Begin on Enactment.--Notwithstanding 
subsection (a), section 140B(n)(1) of the Truth in Lending Act (as 
added by section 4(a)) shall take effect upon enactment of this Act.
    (c) Moratorium on Fee Increases.--
            (1) In general.--During the 1-year period beginning on the 
        date of the enactment of this Act, no depository institution 
        may increase the overdraft coverage fees or charges assessed on 
        transaction accounts for paying a transaction (including a 
        check or other debit) in connection with an overdraft or for 
        nonsufficient funds.
            (2) Definitions.--As used in this section, the terms 
        ``depository institution'', ``overdraft'', ``overdraft coverage 
        fee'', ``transaction account'' and ``nonsufficient fund fee'' 
        have the same meanings as in section 103(ee) of the Truth in 
        Lending Act, as added by this Act.
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