Circles Initiative

Fed takes aim at overdraft policies.

I’d like to bring to your attention a story in the Washington Post about the federal government taking action to limit bank overdraft fees. In a recent community assessment presented by Circles Leaders in the Monroe County Circles Initiative, the overuse of these fees was identified as a significant problem affecting low-income households.

The Obama administration is currently taking action to limit overdraft fees related to ATM withdrawals and debit card transactions, which account for about half of overdraft transactions according to the story. You can read the whole story by clicking here.

In addition, members of Congress are considering taking further action to restrict overdraft fees, as explained in the final section of the story (provided below). We will keep you posted on Inside SCCAP about the progress of this legislation. 

Congress may weigh in

Two bills — from Rep. Carolyn B. Maloney (D-N.Y.) and Sen. Christopher J. Dodd (D-Conn.) — would more aggressively curtail overdraft fees. Both limit overdraft charges at one per month and six per year and require fees to be proportional to the amount of the overdraft. They also prevent banks from debiting the most expensive purchases from accounts first, which could increase the number of overdrawn transactions. Maloney’s bill covers checks in the opt-in requirement, but Dodd’s does not.

Both lawmakers praised the Fed’s action on Thursday but said they plan to move forward with their bills. A hearing for Dodd’s legislation is scheduled for Tuesday.

“This is a long-overdue announcement for American consumers,” Dodd said in a statement. But, he added, “we need to do far more to protect customers from abusive bank products.

Some banks have already begun making changes to their overdraft programs. J.P. Morgan announced last month that it would begin requiring customers to opt-in to overdraft protection in the first quarter of next year. It also said it would not charge a fee if the account is in the red by less than $5. Bank of America said it would allow customers to opt out of its program and restrict fees to overdrafts of more than $10.


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