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CRL Supports Legislation to Reform Bank Overdraft Fees

Tags » Checking Accounts, Debit Cards, Overdraft Fees  » Comments (1)

Congressional proposals to rein in abusive overdraft practices are long overdue, Center for Responsible Lending executive Eric Halperin told the House Financial Services Committee today (full testimony). Halperin, who is director of CRL's Washington office, gave full support to legislation aimed at reforming bank overdraft programs, which cost consumers $23.7 billion last year and are among the most predatory lending products on the market.

"Charging people a $35 fee for a small, debit card transaction is unacceptable," said Halperin, director of CRL's Washington office. "It doesn't save them bounced check fees, it simply skims money from their account and puts them in a bind."



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Overdraft fees can be reduced by banks paying checks from lowest to highest. For example, if an account has $1,300 and the checks presented that day are for $1,400, $500 and $600, a bank will pay the $1,400 check first so three overdraft charges can be charged. The bank could pay the $500 check first, followed by the $600 check and then the $1,400 check. Therefore, only one overdraft charge would be incurred by the consumer. Bank presidents are not going to voluntarily pay the checks to favor the consumer. Congress needs to regulate the order of how checks are paid. The technology is there to pay consumer checks in steps as opposed to the current method.


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