Dodd to Introduce Bill Tackling Overdraft Fees
Senate Banking Committee Chairman Chris Dodd (D-Conn.) will soon unveil legislation to rein in the overdraft fees that banks charge consumers who exceed their balances with debit card purchases, American Banker reported Thursday (subscription required).
The bill is sure to provoke an outcry from the banking industry, which claims the overdraft policy protects consumers by covering their purchases even when accounts have run dry. But many lawmakers and consumer groups maintain that the fees — averaging nearly $30 a pop — are excessive, particularly because consumers are rarely informed that they’re about to exceed their balance — or that a $30 penalty will accompany their latte purchase.
There’s a lot at stake here. Overdraft fees are estimated to bring the banks more than $38 billion this year alone, The Washington Post reported today, citing data from Moebs Services, an Illinois-based financial research firm.
Similar legislation to rein in overdrafts, introduced by Rep. Carolyn Maloney (D-N.Y), has been sitting idle in the House for months.
You’ll recall that Dodd recently passed on the chance to take over the chairmanship of the Senate Health, Education, Labor and Pensions Committee, saying there is “important work” left for the Banking panel. He was talking about a slew of new finance industry reforms the Democrats hope to tackle this year, of which overdraft reform is just one piece.
Facing a difficult election next year, Dodd will need such victories to convince a skeptical public that the millions of dollars he’s accepted from the banks over the years haven’t left him using kid gloves when it comes to taking on the industry.