[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4277 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 4277
To amend the Truth in Lending Act to establish fair and transparent
practices related to the marketing and provision of overdraft coverage
programs at financial institutions, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 30, 2021
Mrs. Carolyn B. Maloney of New York (for herself, Mr. Carson, Mr.
Cicilline, Mr. Cohen, Mr. Danny K. Davis of Illinois, Mr. Foster, Mr.
Garcia of Illinois, Ms. Garcia of Texas, Mr. Grijalva, Mrs. Hayes, Mr.
Khanna, Mr. Lawson of Florida, Mr. Lynch, Mr. McGovern, Ms. Moore of
Wisconsin, Ms. Newman, Ms. Norton, Mr. Payne, Mr. Raskin, Miss Rice of
New York, Mr. Rush, Mr. San Nicolas, Ms. Schakowsky, Mr. Sherman, Mr.
Sires, Mr. Suozzi, Mr. Takano, Ms. Tlaib, Mr. Torres of New York, Mr.
Trone, and Ms. Velazquez) 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 financial 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 2021''.
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--The Congress finds the following:
(1) Overdraft coverage is a form of short-term credit that
financial institutions market for consumer accounts.
Historically, financial 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 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.
(4) Many financial institutions collect a high flat fee,
including for small dollar transactions, each time the
institution covers an overdraft, impose multiple overdraft
coverage fees within a single day, and 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 options and
placed significant financial burdens on low- and moderate-
income consumers.
(6) African Americans and Latinos are disproportionately
harmed by overdraft coverage fees and more likely to pay
multiple overdraft coverage fees annually.
(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) Financial institution.--The term `financial
institution' has the same meaning as in the Electronic Fund
Transfer Act (15 U.S.C. 1693a(9)).
``(3) Nonsufficient fund fee.--The term `nonsufficient fund
fee' means a fee or charge assessed in connection with an
overdraft for which a financial institution declines payment.
``(4) Overdraft.--The term `overdraft' means, in a
withdrawal by check or other debit from a consumer 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 account by the financial 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 2021; or
``(B) any transfer from an account linked to
another 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 financial
institution assesses an overdraft coverage fee for overdraft
coverage.
``(8) Account.--The term `account' has the same meaning as
in the Electronic Fund Transfer Act (15 U.S.C. 1693a(2)).''.
(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 financial 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 financial institution that
provides or offers to provide overdraft coverage with respect to
accounts held at that financial 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 account;
and
``(B) the consumer will not be charged a fee if
such transaction is declined.
``(c) Consumer Consent Opt-In.--A financial 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 financial institution shall
clearly disclose to each consumer covered by an overdraft coverage
program of that financial 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 account; and
``(B) the financial 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 financial institution that offers
an overdraft coverage program shall, in each periodic statement for any
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 financial
institution may include the amount available under the overdraft
coverage program of a consumer as part of the account balance of that
consumer and the account balance shall be more prominently displayed
than any amount available under the overdraft coverage program.
``(g) Prompt Notification.--Each financial 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 financial 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 financial
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 financial 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 account.
``(3) Reasonable and proportional overdraft coverage
fees.--
``(A) In general.--The amount of any overdraft
coverage fee that a financial institution may assess
for paying a transaction (including a check or other
debit) shall be reasonable and proportional to--
``(i) the amount of the overdraft; and
``(ii) the cost to the financial
institution in providing the overdraft coverage
for that transaction.
``(B) Safe harbor rule authorized.--The Bureau, in
consultation with the Board of Governors of the Federal
Reserve System, the 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 and the cost to the financial institution in
providing the overdraft coverage for the transaction.
``(4) Posting order.--Each financial institution shall post
transactions with respect to accounts in such a manner that
minimizes overdraft coverage fees and nonsufficient fund fees.
``(j) Debit Holds.--No financial 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 account that
exceeds the actual dollar amount of the transaction.
``(k) Nondiscrimination for Not Opting In.--In implementing the
requirements of this section, each financial institution shall provide
to consumers who have not consented to participate in an overdraft
coverage program, 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.--
``(1) In general.--No financial institution may charge any
nonsufficient fund fee with respect to--
``(A) any transaction at an automated teller
machine; or
``(B) any debit card transaction.
``(2) Reasonable and proportional overdraft coverage
fees.--The amount of any nonsufficient fund fee shall be
reasonable and proportional to the cost to the financial
institution directly associated with returning the transaction.
``(3) Safe harbor rule authorized.--The Bureau, in
consultation with the Board of Governors of the Federal Reserve
System, the 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 non-sufficient fund fee that is presumed to
be reasonable and proportional to the costs to the financial
institution of returning the transaction.
``(m) Reports to Consumer Reporting Agencies.--No financial
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 financial 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 financial institution may
increase the overdraft coverage fees or charges assessed on
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
``financial institution'', ``overdraft'', ``overdraft coverage
fee'', ``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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