Cory Booker wants banks to stop charging so many overdraft fees

[Mosby]

Senator Cory Booker is bringing back legislation that takes aim at the big banks by severely curbing their use of overdraft fees.

These fees come up when people spend or withdraw more than their available checking account balance, and they’ve become a crucial source of revenue for financial institutions that have long targeted low-income customers who struggle the most to stay out of debt.

Under the Trump administration, the Consumer Financial Protection Bureau (CFPB) has taken an even more lax approach to enforcing limitations on such fees: As of last week, it’s now considering overturning a rule that requires banks to obtain consumer consent before imposing overdraft penalties.

Vox was given an exclusive look at Booker and Sen. Sherrod Brown’s (D-OH) recently reintroduced legislation, which was informed by a survey of several large banks. Their bill would push back against the expansion of overdraft fees, barring financial institutions from charging them on debit card transactions and ATM withdrawals. The legislation would also restrict the frequency of such charges on payments made by check.

“It’s been well-documented for many years that banks have used a variety of methods to push people into incurring overdraft fees to boost their income,” said Lauren Saunders, an associate director at the National Consumer Law Center, who helped work on the legislation last year. “They do a lot to push huge costs on the people least able to bear them.”

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Booker’s legislation, dubbed the Stop Overdraft Profiteering Act of 2019, would bar banks from imposing overdraft fees on debit card or ATM transactions. It would also curb the number of overdraft fees that could be levied on check-based transactions and prohibit banks from reordering the sequence of user activity.

“Overdraft fees fall on those least likely to be able to afford them — individuals for whom a $35 overdraft charge could push them over the brink into financial ruin,” Booker said in a statement.

If overdraft fees were eliminated as the bill outlines, a few things could happen. More customers could see transactions get outright declined, so they wouldn’t be able to follow through on purchases, but they also wouldn’t be hit with a sudden unexpected fee. Banks could also treat the money that customers are taking out the same way they treat other credit — by charging an interest rate on it.

https://www.vox.com/policy-and-politics/2019/5/22/18634581/cory-booker-banks-overdraft-fees