Senate Banking Committee Examines Overdraft Fees
During a hearing this week to examine the fees charged to customers enrolled in overdraft coverage programs, the Senate Banking Committee took financial institutions to task about not asking customersâ€™ permission when adding coverage.
â€śLetâ€™s be clear. Â It is a responsibility each one of us has to manage our personal accounts as well as we possibly can and to spend within our means,â€ť said Sen. Christopher Dodd (D-Connecticut), who chairs the panel. Â â€śBut lending institutions often add overdraft coverage to consumer accounts without informing consumers or giving them a choice.â€ť
Dodd has introduced a bill called the Fairness and Accountability in Receiving Overdraft Coverage Act, which aims to protect consumers by limiting the number of monthly and annual overdraft coverage fees banks can charge; requiring that fees be proportional to the cost of processing the overdraft; and stopping institutions from manipulating the order in which they post transactions in order to rack up extra fees. Customers would have to be notified when theyâ€™re overdrawn and be given the option of being notified by email, text or traditional mail. It also would require that customers be warned if an ATM or branch teller transaction will overdraw their account, and be given the chance to cancel the transaction.
â€śAfter it came out in the press that I was working on this legislation, a few of the large institutions took steps toward responsible reform,â€ť said Dodd.
John Carey, chief administrative officer at Citibank, testified that his bank has instituted a cap of four fees per day, which also includes insufficient funds fees.
â€śWe believe that consumers need transparency, especially at the transaction point in order to make informed choices about incurring such fees.Â That is why we support additional efforts to improve consumer awareness regarding overdraft protection and alternative payment options to help people be smart and responsible about money management,â€ť he said.