Summary of overdraft protection act

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Following is a summary of the bill of the Consumer Overdraft Protection Fair Practices Act, expected to be reintroduced in Congress this year, sponsored by Rep. Carolyn Maloney, D-N.Y., Sen. Bernie Sanders, I-Vt., and Rep. Barney Frank, D-Mass.

Read about the FDIC overdraft study, and a summary of the study’s results.

  • Prohibits depository institutions from imposing any fee in connection with an overdraft protection program or service unless the consumer has provided specific written consent for the program or service.
  • Requires written disclosure of all terms and charges related to overdraft protection programs and services, including the amount of any fees charged to cover overdrafts, types of transactions covered, time period in which the consumer must repay an overdraft, and the circumstances under which the institution will not pay an overdraft.
  • Prohibits depository institution from claiming it will cover all overdrafts on a consumer’s account when it reserves the ability to pay overdrafts on a discretionary basis.
  • Prohibits depository institution from engaging in any pattern or practice of delaying the posting of deposits, or manipulating the posting of any check against an account, for the purpose of creating overdrafts that require overdraft protection fees.
  • Requires ATMs operated by the same institution that holds a consumer’s account to provide the actual dollar balance of the consumer’s account in response to a balance inquiry rather than any higher amount the institution will cover as overdrafts.
  • Requires ATMs operated by an institution that holds a consumer’s account to notify the consumer when a requested transaction may trigger an overdraft protection fee and permit the consumer to cancel the transaction and avoid the fee.
  • Prohibits advertisements by depository institutions that portray overdraft protection as short-term credit, or that claim consumers may maintain negative account balances, when consumers are required to promptly repay all overdrafts.
  • Clarifies that fees charged for the most widely advertised, non-traditional forms of overdraft protection are “credit” for purposes of all relevant consumer disclosures required by the Truth in Lending Act and Regulation Z.

Source: U.S. House of Representatives