117 S2677 IS: Stop Overdraft Profiteering Act of 2021 U.S. Senate 2021-08-09 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

II117th CONGRESS1st SessionS. 2677IN THE SENATE OF THE UNITED STATESAugust 9, 2021Mr. Booker (for himself and Ms. Warren) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban AffairsA BILLTo amend the Truth in Lending Act to limit overdraft fees and establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions, and for other purposes.

1.

Short title

This Act may be cited as the Stop Overdraft Profiteering Act of 2021.

2.

Findings and purpose

(a)

Findings

Congress finds the following:(1)Overdraft coverage is a form of short-term credit that depository institutions market 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 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 depository 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.(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.

3.

Definitions

In this Act:(1)

CFPB

The term CFPB means the Bureau of Consumer Financial Protection.(2)

Depository institution; overdraft; overdraft coverage fee; transaction account; nonsufficient fund fee

The terms depository institution, overdraft, overdraft coverage fee, transaction account, and nonsufficient fund fee have the meanings given the terms in 140B(p) of the Truth in Lending Act, as added by section 4 of this Act.

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:

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 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 any overdraft coverage fees with respect to such overdraft coverage.(c)

Overdraft coverage fees

(1)

In general

Except as provided in paragraph (2), no depository institution may charge an overdraft coverage fee for any transaction—(A)at an automated teller machine; or(B)involving a one-time debit card transaction.(2)

Overdraft fees permitted for checks and automatic recurring payments

A depository institution may charge an overdraft coverage fee for a check or an automatic recurring payment as part of an overdraft coverage program that incorporates the requirements identified in subsections (d) through (l).(d)

Consumer consent opt-In

A depository institution may charge overdraft coverage fees with respect to the use of checks or automatic recurring payments only if—(1)the depository institution has waited at least 3 days after opening an account to offer the overdraft coverage program; and(2)the consumer has consented in writing, in electronic form, or in such other form as is permitted under regulations of the Bureau.(e)

Consumer disclosures

Each depository institution shall clearly disclose to each consumer covered by an overdraft protection program of that depository institution—(1)that the consumer may be charged for not more than 1 overdraft coverage fee in any single calendar month and not more than 6 overdraft coverage fees in any single calendar year, per transaction account;(2)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(3)such other information as the Bureau may require, by rule.(f)

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.(g)

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 and the transaction account balance shall be more prominently displayed than any amount available under the overdraft coverage program.(h)

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;(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; and(7)information about any alternative overdraft products as described in this section. (i)

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.(j)

Overdraft coverage restrictions and fee limits for checks and automatic recurring payments

(1)

Frequency

A depository institution may charge not more than 1 overdraft coverage fee in any single calendar month, and not more than 6 overdraft coverage fees in any single calendar year, per transaction account.(2)

Reasonable and proportional overdraft coverage fees

(A)

In general

The amount of any overdraft coverage fee shall be reasonable and proportional to the cost to the financial institution in providing the overdraft coverage for that transaction, including the cost to the financial institution of funds and other costs directly associated with the 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 costs to the financial institution in providing the overdraft coverage for the transaction.(3)

Posting order

Each depository institution shall post transactions with respect to transaction accounts in such a manner that minimizes overdraft coverage fees and nonsufficient fund fees.(k)

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.(l)

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.(m)

Nonsufficient fund fee limits

(1)

In general

No depository 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

Reasonable and proportional nonsufficient fund fees.(A)

In general

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.(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 non-sufficient fund fee that is presumed to be reasonable and proportional to the costs to the financial institution of returning the transaction. (n)

Reports to consumer reporting agencies

(1)

In general

No depository institution may report negative information regarding the use of overdraft coverage by a consumer to any consumer reporting agency, as defined in section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a), when the amounts of the overdraft are repaid under the terms of an overdraft coverage program.(2)

Deletion

A depository institution shall request that the consumer reporting agency described in paragraph (1) delete any previously reported negative information, including closure of an account due to unpaid overdrafts, if the consumer repays the overdrafts or tenders payment for the overdrafts to the depository institution or its successor.(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.(p)

Definitions relating to overdraft coverage

For purposes of this section:(1)

Check

The term check—(A)has the meaning given the term in section 3 of the Check Clearing for the 21st Century Act (12 U.S.C. 5002); and(B)does not include a traveler's check.(2)

Depository institution

The term depository institution means any entity described 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—(A)means any fee or charge assessed in connection with overdraft coverage, or in connection with any negative account balance that results from overdraft coverage; and(B)does not include—(i)a periodic rate in connection with an extension of credit through an overdraft line of credit program; and(ii)a fee or charge imposed in connection with any transfer from an account linked to another transaction account.(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 meaning given the term in section 19(b)(1) of the Federal Reserve Act (12 U.S.C. 461(b)(1)).

.(b)

Technical amendment

The table of contents for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 140A the following:140B. Overdraft coverage program disclosures and consumer protection..

5.

Regulatory authority of the CFPB

Not later than 2 years after the date of the enactment of this Act, the CFPB 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 section 4 of this Act.

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 CFPB under this Act or such amendments are prescribed in final form.(b)

Moratorium on fee increases

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.