[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4254 Introduced in House (IH)]
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116th CONGRESS
1st Session
H. R. 4254
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
September 9, 2019
Mrs. Carolyn B. Maloney of New York (for herself, Mr. Foster, Mr.
Sherman, Mr. Garcia of Illinois, Mr. Cicilline, Mr. Payne, Ms. Norton,
Mr. Johnson of Georgia, Mr. McGovern, Mr. Grijalva, Mr. Cohen, Ms.
Gabbard, Ms. Moore, Mr. Malinowski, and Mr. Raskin) 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 2019''.
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--The Congress finds the following:
(1) 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.
(2) With the growth in specially designed software programs
and in consumer use of debit cards, overdraft coverage for a
fee has become more prevalent.
(3) 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.
(4) 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.
(5) 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.
(b) Purpose.--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.
SEC. 3. DEFINITIONS.
(a) Additional Definitions.--Section 140B of the Truth in Lending
Act, as added by section 4, is amended by adding at the end the
following new subsection:
``(o) Definitions Relating to Overdraft Coverage.--For purposes of
this section:
``(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 consumer 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 consumer 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 2019; 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 140B(o) of
the Truth in Lending Act'' 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 coverage
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 to 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) 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) 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 140B(o) of the Truth in
Lending Act, as added by this Act.
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