Stop Overdraft Profiteering Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1595 To amend the Truth in Lending Act to limit overdraft fees and establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 22, 2019 Mr. BOOKER (for himself and Mr. BROWN) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Truth in Lending Act to limit overdraft fees and establish fair and transparent practices related to the marketing and provision of overdraft coverage pro- grams at depository institutions, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Stop Overdraft Profit- 4 eering Act of 2019’’. 5 SEC. 2. FINDINGS AND PURPOSE. 6 (a) FINDINGS.—Congress finds the following: 7 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 2 •S 1595 IS (1) Overdraft coverage is a form of short-term 1 credit that depository institutions market for con- 2 sumer transaction accounts. Historically, depository 3 institutions covered overdrafts for a fee on an ad hoc 4 basis. 5 (2) With the growth in specially designed soft- 6 ware programs and in consumer use of debit cards, 7 overdraft coverage for a fee has become more preva- 8 lent. 9 (3) Many depository institutions market a 10 range of overdraft options but aggressively encour- 11 age consumers to consent to the most expensive op- 12 tion, where a high flat fee is collected for every indi- 13 vidual overdraft transaction. 14 (4) Many depository institutions collect a high 15 flat fee, including for small dollar transactions, each 16 time the institution covers an overdraft, impose mul- 17 tiple overdraft coverage fees within a single day, and 18 charge additional fees for each day during which the 19 account remains overdrawn. 20 (5) Such abusive practices in connection with 21 overdraft coverage fees have deprived consumers of 22 meaningful options and placed significant financial 23 burdens on low- and moderate-income consumers. 24 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 3 •S 1595 IS (b) PURPOSE.—It is the purpose of this Act to pro- 1 tect consumers by limiting abusive overdraft coverage fees 2 and practices and by providing meaningful disclosures and 3 consumer choice in connection with overdraft coverage 4 fees. 5 SEC. 3. DEFINITIONS. 6 In this Act: 7 (1) CFPB.—The term ‘‘CFPB’’ means the Bu- 8 reau of Consumer Financial Protection. 9 (2) DEPOSITORY INSTITUTION; OVERDRAFT; 10 OVERDRAFT COVERAGE FEE; TRANSACTION AC- 11 COUNT; NONSUFFICIENT FUND FEE.—The terms 12 ‘‘depository institution’’, ‘‘overdraft’’, ‘‘overdraft cov- 13 erage fee’’, ‘‘transaction account’’, and ‘‘nonsuffi- 14 cient fund fee’’ have the meanings given the terms 15 in 140B(p) of the Truth in Lending Act, as added 16 by section 4 of this Act. 17 SEC. 4. FAIR MARKETING AND PROVISION OF OVERDRAFT 18 COVERAGE PROGRAMS. 19 (a) IN GENERAL.—Chapter 2 of the Truth in Lend- 20 ing Act (15 U.S.C. 1631 et seq.) is amended by adding 21 at the end the following: 22 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 4 •S 1595 IS ‘‘§ 140B. Overdraft coverage program disclosures and 1 consumer protection 2 ‘‘(a) PROHIBITIONS.—No depository institution may 3 engage in acts or practices in connection with the mar- 4 keting of or the provision of overdraft coverage that are 5 designed to evade the provisions of this section. 6 ‘‘(b) MARKETING DISCLOSURES.—Each depository 7 institution that provides or offers to provide overdraft cov- 8 erage with respect to transaction accounts held at that de- 9 pository institution shall clearly and conspicuously disclose 10 in all marketing materials for such overdraft coverage any 11 overdraft coverage fees with respect to such overdraft cov- 12 erage. 13 ‘‘(c) OVERDRAFT COVERAGE FEES.— 14 ‘‘(1) IN GENERAL.—Except as provided in para- 15 graph (2), no depository institution may charge an 16 overdraft coverage fee for any transaction— 17 ‘‘(A) at an automated teller machine; or 18 ‘‘(B) involving a one-time debit card trans- 19 action. 20 ‘‘(2) OVERDRAFT FEES PERMITTED FOR 21 CHECKS AND AUTOMATIC RECURRING PAYMENTS.— 22 A depository institution may charge an overdraft 23 coverage fee for a check or an automatic recurring 24 payment as part of an overdraft coverage program 25 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 5 •S 1595 IS that incorporates the requirements identified in sub- 1 sections (d) through (l). 2 ‘‘(d) CONSUMER CONSENT OPT-IN.—A depository in- 3 stitution may charge overdraft coverage fees with respect 4 to the use of checks or automatic recurring payments only 5 if— 6 ‘‘(1) the depository institution has waited at 7 least 3 days after opening an account to offer the 8 overdraft coverage program; and 9 ‘‘(2) the consumer has consented in writing, in 10 electronic form, or in such other form as is per- 11 mitted under regulations of the Bureau. 12 ‘‘(e) CONSUMER DISCLOSURES.—Each depository in- 13 stitution shall clearly disclose to each consumer covered 14 by an overdraft protection program of that depository in- 15 stitution— 16 ‘‘(1) that the consumer may be charged for not 17 more than 1 overdraft coverage fee in any single cal- 18 endar month and not more than 6 overdraft cov- 19 erage fees in any single calendar year, per trans- 20 action account; 21 ‘‘(2) information about any alternative over- 22 draft products that are available (such as linked ac- 23 counts, lines of credit, and alerts), including a clear 24 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 6 •S 1595 IS explanation of how the terms and fees for such alter- 1 native services and products differ; and 2 ‘‘(3) such other information as the Bureau may 3 require, by rule. 4 ‘‘(f) PERIODIC STATEMENTS.—Each depository insti- 5 tution that offers an overdraft coverage program shall, in 6 each periodic statement for any transaction account that 7 has an overdraft coverage program feature, clearly disclose 8 to the consumer the dollar amount of all overdraft cov- 9 erage fees and nonsufficient fund fees charged to the con- 10 sumer for the relevant period and year to date. 11 ‘‘(g) EXCLUSION FROM ACCOUNT BALANCE INFOR- 12 MATION.—No depository institution may include the 13 amount available under the overdraft coverage program of 14 a consumer as part of the transaction account balance of 15 that consumer and the transaction account balance shall 16 be more prominently displayed than any amount available 17 under the overdraft coverage program. 18 ‘‘(h) PROMPT NOTIFICATION.—Each depository insti- 19 tution shall promptly notify consumers, through a reason- 20 able means selected by the consumer, when overdraft cov- 21 erage has been accessed with respect to the account of 22 the consumer, not later than on the day on which such 23 access occurs, including— 24 ‘‘(1) the date of the transaction; 25 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 7 •S 1595 IS ‘‘(2) the type of transaction; 1 ‘‘(3) the overdraft amount; 2 ‘‘(4) the overdraft coverage fee; 3 ‘‘(5) the amount necessary to return the ac- 4 count to a positive balance; and 5 ‘‘(6) whether the participation of a consumer in 6 an overdraft coverage program will be terminated if 7 the account is not returned to a positive balance 8 within a given time period. 9 ‘‘(i) TERMINATED OR SUSPENDED COVERAGE.— 10 Each depository institution shall provide prompt notice to 11 the consumer, using a reasonable means selected by the 12 consumer, if the institution terminates or suspends access 13 to an overdraft coverage program with respect to an ac- 14 count of the consumer, including a clear rationale for the 15 action. 16 ‘‘(j) OVERDRAFT COVERAGE RESTRICTIONS AND FEE 17 LIMITS FOR CHECKS AND AUTOMATIC RECURRING PAY- 18 MENTS.— 19 ‘‘(1) FREQUENCY.—A depository institution 20 may charge not more than 1 overdraft coverage fee 21 in any single calendar month, and not more than 6 22 overdraft coverage fees in any single calendar year, 23 per transaction account. 24 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 8 •S 1595 IS ‘‘(2) REASONABLE AND PROPORTIONAL OVER- 1 DRAFT COVERAGE FEES.— 2 ‘‘(A) IN GENERAL.—The amount of any 3 overdraft coverage fee shall be reasonable and 4 proportional to the cost to the financial institu- 5 tion in providing the overdraft coverage for that 6 transaction, including the cost to the financial 7 institution of funds and other costs directly as- 8 sociated with the transaction. 9 ‘‘(B) SAFE HARBOR RULE AUTHORIZED.— 10 The Bureau, in consultation with the Board of 11 Governors of the Federal Reserve System, the 12 Comptroller of the Currency, the Board of Di- 13 rectors of the Federal Deposit Insurance Cor- 14 poration, and the National Credit Union Ad- 15 ministration Board, may issue rules to provide 16 an amount for any overdraft coverage fee that 17 is presumed to be reasonable and proportional 18 to the costs to the financial institution in pro- 19 viding the overdraft coverage for the trans- 20 action. 21 ‘‘(3) POSTING ORDER.—Each depository insti- 22 tution shall post transactions with respect to trans- 23 action accounts in such a manner that minimizes 24 overdraft coverage fees and nonsufficient fund fees. 25 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 9 •S 1595 IS ‘‘(k) DEBIT HOLDS.—No depository institution may 1 charge an overdraft coverage fee on any category of trans- 2 action, if the overdraft results solely from a debit hold 3 amount placed on a transaction account that exceeds the 4 actual dollar amount of the transaction. 5 ‘‘(l) NONDISCRIMINATION FOR NOT OPTING IN.—In 6 implementing the requirements of this section, each depos- 7 itory institution shall provide to consumers who have not 8 consented to participate in an overdraft coverage program 9 transaction accounts having the same terms, conditions, 10 or other features as those that are provided to consumers 11 who have consented to participate in such overdraft cov- 12 erage program, except for features of such overdraft cov- 13 erage. 14 ‘‘(m) NONSUFFICIENT FUND FEE LIMITS.—No de- 15 pository institution may charge any nonsufficient fund fee 16 with respect to— 17 ‘‘(1) any transaction at an automated teller ma- 18 chine; or 19 ‘‘(2) any debit card transaction. 20 ‘‘(n) REPORTS TO CONSUMER REPORTING AGEN- 21 CIES.— 22 ‘‘(1) IN GENERAL.—No depository institution 23 may report negative information regarding the use 24 of overdraft coverage by a consumer to any con- 25 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 10 •S 1595 IS sumer reporting agency, as defined in section 603 of 1 the Fair Credit Reporting Act (15 U.S.C. 1681a), 2 when the amounts of the overdraft are repaid under 3 the terms of an overdraft coverage program. 4 ‘‘(2) DELETION.—A depository institution shall 5 request that the consumer reporting agency de- 6 scribed in paragraph (1) delete any previously re- 7 ported negative information, including closure of an 8 account due to unpaid overdrafts, if the consumer 9 repays the overdrafts or tenders payment for the 10 overdrafts to the depository institution or its suc- 11 cessor. 12 ‘‘(o) RULE OF CONSTRUCTION.—No provision of this 13 section may be construed as prohibiting a depository insti- 14 tution from retaining the discretion to pay, without assess- 15 ing an overdraft coverage fee or charge, an overdraft in- 16 curred by a consumer. 17 ‘‘(p) DEFINITIONS RELATING TO OVERDRAFT COV- 18 ERAGE.—For purposes of this section: 19 ‘‘(1) CHECK.—The term ‘check’— 20 ‘‘(A) has the meaning given the term in 21 section 3 of the Check Clearing for the 21st 22 Century Act (12 U.S.C. 5002); and 23 ‘‘(B) does not include a traveler’s check. 24 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 11 •S 1595 IS ‘‘(2) DEPOSITORY INSTITUTION.—The term ‘de- 1 pository institution’ means any entity described in 2 clauses (i) through (vi) of section 19(b)(1)(A) of the 3 Federal Reserve Act (12 U.S.C. 461(b)(1)(A)). 4 ‘‘(3) NONSUFFICIENT FUND FEE.—The term 5 ‘nonsufficient fund fee’ means a fee or charge as- 6 sessed in connection with an overdraft for which a 7 depository institution declines payment. 8 ‘‘(4) OVERDRAFT.—The term ‘overdraft’ 9 means, in a withdrawal by check or other debit from 10 a consumer transaction account in which there are 11 insufficient or unavailable funds in the account to 12 cover such check or debit, the amount of such with- 13 drawal that exceeds the available funds in the ac- 14 count. 15 ‘‘(5) OVERDRAFT COVERAGE.—The term ‘over- 16 draft coverage’ means the payment of a check pre- 17 sented or other debit posted against a consumer 18 transaction account by the depository institution in 19 which such account is held, even though there are 20 insufficient or unavailable funds in the account to 21 cover such checks or other debits. 22 ‘‘(6) OVERDRAFT COVERAGE FEE.—The term 23 ‘overdraft coverage fee’— 24 VerDate Sep 11 2014 03:48 May 31, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1595.IS S1595 kjohnson on DSK79L0C42 with BILLS 12 •S 1595 IS ‘‘(A) means any fee or charge assessed in 1 connection with overdraft coverage, or in con- 2 nection with any negative account balance that 3 results from overdraft coverage; and 4 ‘‘(B) does not include— 5 ‘‘(i) a periodic rate in connection with 6 an extension of credit through an overdraft 7 line of credit program; and 8 ‘‘(ii) a fee or charge imposed in con- 9 nection with any transfer from an account 10 linked to another transaction account. 11 ‘‘(7) OVERDRAFT COVERAGE PROGRAM.—The 12 term ‘overdraft coverage program’ means a service 13 under which a depository in [Text truncated for display. 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