Overdraft Protection Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 4254 To amend the Truth in Lending Act to establish fair and transparent prac- tices related to the marketing and provision of overdraft coverage pro- grams at depository institutions, and for other purposes. IN THE HOUSE OF REPRESENTATIVES SEPTEMBER 9, 2019 Mrs. CAROLYN B. MALONEY of New York (for herself, Mr. FOSTER, Mr. SHERMAN, Mr. GARCI´A of Illinois, Mr. CICILLINE, Mr. PAYNE, Ms. NOR- TON, Mr. JOHNSON of Georgia, Mr. MCGOVERN, Mr. GRIJALVA, Mr. COHEN, Ms. GABBARD, Ms. MOORE, Mr. MALINOWSKI, and Mr. RASKIN) introduced the following bill; which was referred to the Committee on Fi- nancial Services A BILL To amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provi- sion of overdraft coverage programs at depository institu- tions, 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 ‘‘Overdraft Protection 4 Act of 2019’’. 5 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 4254 IH SEC. 2. FINDINGS AND PURPOSE. 1 (a) FINDINGS.—The Congress finds the following: 2 (1) Overdraft coverage is a form of short-term 3 credit that depository institutions provide for con- 4 sumer transaction accounts. Historically, depository 5 institutions covered overdrafts for a fee on an ad hoc 6 basis. 7 (2) With the growth in specially designed soft- 8 ware programs and in consumer use of debit cards, 9 overdraft coverage for a fee has become more preva- 10 lent. 11 (3) Many depository institutions offer a range 12 of overdraft options but aggressively encourage con- 13 sumers to consent to the most expensive option, 14 where a high flat fee is collected for every individual 15 overdraft transaction. 16 (4) Most depository institutions collect a high 17 flat fee, including for small dollar transactions, each 18 time the institution covers an overdraft, in some 19 cases impose multiple overdraft coverage fees within 20 a single day, and many charge additional fees for 21 each day during which the account remains over- 22 drawn. 23 (5) Such abusive practices in connection with 24 overdraft coverage fees have deprived consumers of 25 meaningful choices about their accounts and placed 26 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 4254 IH significant financial burdens on low- and moderate- 1 income consumers. 2 (b) PURPOSE.—It is the purpose of this Act to pro- 3 tect consumers by limiting abusive overdraft coverage fees 4 and practices, and by providing meaningful disclosures 5 and consumer choice in connection with overdraft coverage 6 fees. 7 SEC. 3. DEFINITIONS. 8 (a) ADDITIONAL DEFINITIONS.—Section 140B of the 9 Truth in Lending Act, as added by section 4, is amended 10 by adding at the end the following new subsection: 11 ‘‘(o) DEFINITIONS RELATING TO OVERDRAFT COV- 12 ERAGE.—For purposes of this section: 13 ‘‘(1) CHECK.—The term ‘check’ has the same 14 meaning as in section 3(6) of the Check Clearing for 15 the 21st Century Act (12 U.S.C. 5001 et seq.), 16 other than a travelers check. 17 ‘‘(2) DEPOSITORY INSTITUTION.—The term ‘de- 18 pository institution’ has the same meaning as in 19 clauses (i) through (vi) of section 19(b)(1)(A) of the 20 Federal Reserve Act (12 U.S.C. 461(b)(1)(A)). 21 ‘‘(3) NONSUFFICIENT FUND FEE.—The term 22 ‘nonsufficient fund fee’ means a fee or charge as- 23 sessed in connection with an overdraft for which a 24 depository institution declines payment. 25 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 4254 IH ‘‘(4) OVERDRAFT.—The term ‘overdraft’ 1 means, in a withdrawal by check or other debit from 2 a consumer transaction account in which there are 3 insufficient or unavailable funds in the account to 4 cover such check or debit, the amount of such with- 5 drawal that exceeds the available funds in the ac- 6 count. 7 ‘‘(5) OVERDRAFT COVERAGE.—The term ‘over- 8 draft coverage’ means the payment of a check pre- 9 sented or other debit posted against a consumer 10 transaction account by the depository institution in 11 which such account is held, even though there are 12 insufficient or unavailable funds in the account to 13 cover such checks or other debits. 14 ‘‘(6) OVERDRAFT COVERAGE FEE.—The term 15 ‘overdraft coverage fee’ means any fee or charge as- 16 sessed in connection with overdraft coverage, or in 17 connection with any negative account balance that 18 results from overdraft coverage, unless such fee or 19 charge is imposed in connection with— 20 ‘‘(A) an extension of credit through an 21 overdraft line of credit program where such fee 22 or charge was considered a finance charge 23 under this title as in effect immediately prior to 24 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 4254 IH the enactment of the Overdraft Protection Act 1 of 2019; or 2 ‘‘(B) any transfer from an account linked 3 to another transaction account. 4 Such fee shall be considered a ‘finance charge’ for 5 purposes of section 106(a), but shall not be included 6 in the calculation of the rate of interest for purposes 7 of section 107(5)(A)(vi) of the Federal Credit Union 8 Act (12 U.S.C. 1757(5)(A)(vi)). 9 ‘‘(7) OVERDRAFT COVERAGE PROGRAM.—The 10 term ‘overdraft coverage program’ means a service 11 under which a depository institution assesses an 12 overdraft coverage fee for overdraft coverage. 13 ‘‘(8) TRANSACTION ACCOUNT.—The term 14 ‘transaction account’ has the same meaning as in 15 section 19(b)(1)(C) of the Federal Reserve Act (12 16 U.S.C. 461(b)(1)(C)).’’. 17 (b) CONFORMING AMENDMENT.—Section 18 107(5)(A)(vi) of the Federal Credit Union Act (12 U.S.C. 19 1757(5)(A)(vi)) is amended by inserting ‘‘, other than an 20 overdraft coverage fee, as defined in section 140B(o) of 21 the Truth in Lending Act’’ after ‘‘inclusive of all finance 22 charges’’. 23 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 4254 IH SEC. 4. FAIR MARKETING AND PROVISION OF OVERDRAFT 1 COVERAGE PROGRAMS. 2 (a) IN GENERAL.—Chapter 2 of the Truth in Lend- 3 ing Act (15 U.S.C. 1631 et seq.) is amended by adding 4 at the end the following new section: 5 ‘‘§ 140B. Overdraft coverage program disclosures and 6 consumer protection 7 ‘‘(a) PROHIBITIONS.—No depository institution may 8 engage in acts or practices in connection with the mar- 9 keting of or the provision of overdraft coverage that are 10 unfair, deceptive, or designed to evade the provisions of 11 this section. 12 ‘‘(b) MARKETING DISCLOSURES.—Each depository 13 institution that provides or offers to provide overdraft cov- 14 erage with respect to transaction accounts held at that de- 15 pository institution shall clearly and conspicuously disclose 16 in all marketing materials for such overdraft coverage— 17 ‘‘(1) any overdraft coverage fees with respect to 18 such overdraft coverage; and 19 ‘‘(2) that by not opting in to such overdraft 20 coverage— 21 ‘‘(A) a consumer’s transaction may be de- 22 clined if there are insufficient funds in the re- 23 lated transaction account; and 24 ‘‘(B) the consumer will not be charged a 25 fee if such transaction is declined. 26 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 4254 IH ‘‘(c) CONSUMER CONSENT OPT-IN.—A depository in- 1 stitution may charge overdraft coverage fees with respect 2 to the use of an automatic teller machine or point of sale 3 transaction only if the consumer has consented in writing, 4 in electronic form, or in such other form as is permitted 5 under regulations of the Bureau. 6 ‘‘(d) CONSUMER DISCLOSURES.—Each depository in- 7 stitution shall clearly disclose to each consumer covered 8 by an overdraft coverage program of that depository insti- 9 tution— 10 ‘‘(1) that— 11 ‘‘(A) the consumer may be charged for not 12 more than one overdraft coverage fee in any 13 single calendar month and not more than 6 14 overdraft coverage fees in any single calendar 15 year, per transaction account; and 16 ‘‘(B) the depository institution retains the 17 discretion to pay (without assessing an over- 18 draft coverage fee) or reject overdrafts incurred 19 by the consumer beyond the numbers described 20 in subparagraph (A); 21 ‘‘(2) the overdraft coverage fee as an annual 22 percentage rate, so as to permit consumers to mean- 23 ingfully compare the overdraft coverage to alter- 24 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 4254 IH native forms of overdraft options and other sources 1 of credit; 2 ‘‘(3) information about any alternative over- 3 draft products that are available (such as linked ac- 4 counts, lines of credit, and alerts), including a clear 5 explanation of how the terms and fees for such alter- 6 native services and products differ; and 7 ‘‘(4) such other information as the Bureau may 8 require, by rule. 9 ‘‘(e) PERIODIC STATEMENTS.—Each depository insti- 10 tution that offers an overdraft coverage program shall, in 11 each periodic statement for any transaction account that 12 has an overdraft coverage program feature, clearly disclose 13 to the consumer the dollar amount of all overdraft cov- 14 erage fees and nonsufficient fund fees charged to the con- 15 sumer for the relevant period and year to date. 16 ‘‘(f) EXCLUSION FROM ACCOUNT BALANCE INFOR- 17 MATION.—No depository institution may include the 18 amount available under the overdraft coverage program of 19 a consumer as part of the transaction account balance of 20 that consumer. 21 ‘‘(g) PROMPT NOTIFICATION.—Each depository insti- 22 tution shall promptly notify consumers, through a reason- 23 able means selected by the consumer, when overdraft cov- 24 erage has been accessed with respect to the account of 25 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 4254 IH the consumer, not later than on the day on which such 1 access occurs, including— 2 ‘‘(1) the date of the transaction; 3 ‘‘(2) the type of transaction; 4 ‘‘(3) the overdraft amount; 5 ‘‘(4) the overdraft coverage fee; 6 ‘‘(5) the amount necessary to return the ac- 7 count to a positive balance; and 8 ‘‘(6) whether the participation of a consumer in 9 an overdraft coverage program will be terminated if 10 the account is not returned to a positive balance 11 within a given time period. 12 ‘‘(h) TERMINATED OR SUSPENDED COVERAGE.— 13 Each depository institution shall provide prompt notice to 14 the consumer, using a reasonable means selected by the 15 consumer, if the institution terminates or suspends access 16 to an overdraft coverage program with respect to an ac- 17 count of the consumer, including a clear rationale for the 18 action. 19 ‘‘(i) OVERDRAFT COVERAGE FEE LIMITS.— 20 ‘‘(1) NOTICE AND OPPORTUNITY TO CANCEL.— 21 Each depository institution shall— 22 ‘‘(A) warn any consumer covered by an 23 overdraft coverage program who engages in a 24 transaction through an automated teller ma- 25 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 4254 IH chine or a branch teller if completing the trans- 1 action would trigger overdraft coverage fees, in- 2 cluding the amount of the fees; and 3 ‘‘(B) provide to the consumer the oppor- 4 tunity to cancel the transaction before it is 5 completed. 6 ‘‘(2) FREQUENCY.—A depository institution 7 may charge not more than one overdraft coverage 8 fee in any single calendar month, and not more than 9 6 overdraft coverage fees in any single calendar 10 year, per transaction account. 11 ‘‘(3) REASONABLE AND PROPORTIONAL OVER- 12 DRAFT COVERAGE FEES.— 13 ‘‘(A) IN GENERAL.—The amount of any 14 overdraft coverage fee that a depository institu- 15 tion may assess for paying a transaction (in- 16 cluding a check or other debit) shall be reason- 17 able and proportional to the amount of the 18 overdraft. 19 ‘‘(B) SAFE HARBOR RULE AUTHORIZED.— 20 The Bureau, in consultation with the Board of 21 Governors of the Federal Reserve System, 22 Comptroller of the Currency, the Board of Di- 23 rectors of the Federal Deposit Insurance Cor- 24 poration, and the National Credit Union Ad- 25 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 4254 IH ministration Board, may issue rules to provide 1 an amount for any overdraft coverage fee that 2 is presumed to be reasonable and proportional 3 to the amount of the overdraft. 4 ‘‘(4) POSTING ORDER.—In order to minimize 5 overdraft coverage fees charged to consumers, each 6 depository institution shall post transactions with re- 7 spect to transaction accounts in such a manner that 8 the consumer does not incur avoidable overdraft cov- 9 erage fees. 10 ‘‘(j) DEBIT HOLDS.—No depository institution may 11 charge an overdraft coverage fee on any category of trans- 12 action, if the overdraft results solely from a debit hold 13 amount placed on a transaction account that exceeds the 14 actual dollar amount of the transaction. 15 ‘‘(k) NONDISCRIMINATION FOR NOT OPTING IN.—In 16 implementing the requirements of this section, each depos- 17 itory institution shall provide to consumers who have not 18 consented to participate in an overdraft coverage program, 19 transaction accounts having the same terms, conditions, 20 or other features as those that are provided to consumers 21 who have consented to participate in such overdraft cov- 22 erage program, except for features of such overdraft cov- 23 erage. 24 VerDate Sep 11 2014 01:58 Sep 10, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H4254.IH H4254 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 4254 IH ‘‘(l) NONSUFFICIENT FUND FEE LIMITS.—No depos- 1 itory institution may charge any nonsufficient fund fee 2 with respect to— 3 ‘‘(1) any transaction at an automated teller ma- 4 chine; or 5 ‘‘(2) any debit card transaction. 6 ‘‘(m) REPORTS TO CONSUMER REPORTING AGE [Text truncated for display. Full text available on Congress.gov.]