Rep. Barney Frank, the chairman of the House Financial Services Committee, on Friday joined Senate Banking Committee Chairman Chris Dodd, D-Conn., in calling for legislation that would require banks to ask customers whether they want overdraft protection.
"Don't do favors for people without asking them," said Frank, D-Mass., at a hearing on a House overdraft bill introduced by New York Democratic Rep. Carolyn Maloney.
Most banks automatically allow customers to overdraft their accounts, then charge them $25 to $35 per infraction. Banks say that customers want the protection, rather than being denied a purchase at the cash register.
In recent weeks, several major U.S. banks, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., have said that they will allow customers to "opt out" of their overdraft programs.
The House and Senate bills under consideration would go further by requiring that fees be proportional to the cost of the overcharge. The legislation also would prohibit banks from imposing more than one overdraft fee a month, or six per a year.
The recently announced policies by banks seemed too little, too late for federal regulators and lawmakers who say tougher rules should be imposed.
By the end of the year, the Federal Reserve is expected to issue new regulations on overdrafts. Congressional Democrats say they want new rules codified into law.
During Friday's hearing, consumer advocates hailed the proposed law while bank representatives said it was unnecessary.
Michael Menzies, president of Maryland's Easton Bank and Trust Company, said eliminating overdraft protection for many customers will mean denying charges and embarrassing customers or forcing them to rely on high-cost payday lenders.
"While community banks always seek to treat customers honestly, the same expectations must hold true in reverse: customers should not - and generally do not - expect a free pass when a bank covers their overdrafts," Menzies said.
More money-related links:
- Save money with Local Coupons
- Coupon Bug helps you save cash
- Saving with 6abc reports
- Share on the Saving with 6abc Message Board
- Track your stocks
- Follow Action News on Twitter
- Get Action News on your website
- Follow Action News on Facebook
- The latest Philadelphia headlines from the Delaware and Lehigh valleys