Sen. Dodd Wants to Protect the Overdrawn
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Sen. Dodd introduced legislation to protect people from hefty overdraft fees.
Sen. Christopher Dodd wants to protect you if you overdraw your checking account so you're not digging a financial hole so deep you’ll never get out.
On Monday, the Connecticut Senator who runs the banking committee proposed legislation that would add new protections from excessive penalties.
If it passes, you’ll have the choice of whether you want to participate in overdraft programs that charge fees for covering ATM withdrawals and debit card transactions.
Most banks now automatically enroll customers in overdraft programs, so if a sale goes through when you’ve overspent, you’re spare the embarrassment of being declined, but you take a financial hit of $25 to $35 for each overdraft, even if it’s just a few dollars.
Several major banks, aware of Congress’ plans, have already said they will start letting people opt out of overdraft programs. Some have also said they will lower their fees.
Dodd cited estimates that banks stand to collect a record $38.5 billion in fees for customer overdrafts this year.
"At a time when many can afford it least, American consumers are being hit with hundreds of dollars in penalties for overdrawing on their account by just a few dollars," he said in a statement. "Banks should not be trying to bolster their profits at the expense of their customers."
Among the things Dodd’s bill would do is limit the number of overdraft fees banks can charge to one per month and six per year and require that fees be proportional to the cost of processing the overdraft.
Rep. Carolyn Maloney, D-N.Y., has introduced similar legislation in the House.
Dodd noted that last month, after he announced he was drafting the bill, three major banks -- JPMorgan Chase, Bank of America and U.S. Bank and Wells Fargo, said they would undertake what Dodd said were "moderate" changes in their overdraft programs.
Bank of America said that, as of Monday, it won't charge an initial fee for overdrafts under $10. A customer could still get charged the $35 fee for not bringing the account into balance within five days.
Copyright Associated Press
Posted Monday, Oct 19, 2009 - 3:20 PM EST
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