House Committee Approves Controversial Overdraft Bill

By David Baumann - July 29, 2022

Legislation faces uncertain future and is strongly opposed by credit union groups and Republicans.


The House Financial Services Committee on Thursday approved legislation that would limit the number of overdraft fees a credit union or bank may charge a consumer.

Voting 27–22, the committee approved H.R. 4277, legislation that would limit financial institutions from charging consumers more than one overdraft fee per month and more than six in a year.

Republicans vehemently opposed the bill, and it faces an uphill battle, since it likely would take 60 votes to pass in the Senate. Financial trade groups, including CUNA and NAFCU, have been lobbying against the measure.

The bill was approved during a two-day markup of several bills, during which House Financial Services Committee ranking Republican Patrick McHenry of North Carolina charged that Democrats simply were bringing up legislation with an eye toward the fall election.

“These bills are going nowhere,” he flatly declared.

In addition to limiting fees, the bill would require financial institutions to provide a disclosure of overdraft charges and to notify customers that if they do not opt into an overdraft program, their transaction could be rejected. It also would authorize the Consumer Financial Protection Bureau to issue rules within 18 months of the enactment of the legislation.

During the markup, Rep. Carolyn Maloney, D-N.Y., said overdraft fees are largely paid by people who can least afford them, noting that 80% of such fees are paid by 9% of all consumers.

However, Rep. Blaine Luetkemeyer, R-Mo., countered that small financial institutions would simply eliminate voluntary overdraft programs if the bill is enacted.

Response From Credit Union Groups

In a letter to the committee, CUNA President/CEO Jim Nussle wrote that shutting down overdraft fees would limit a credit union’s ability to help members.

“Rather, the best and least disruptive path forward would be to continue permitting transactions to be processed and encouraging affected consumers to reach out to and work with their local credit union to reduce or eliminate any fees or to consider other low-cost products and services,” he stated. “Relying on credit unions to do what they do best is preferable to an environment where consumers are getting declined in line at the grocery store or pharmacy or experience their rent check unpaid.”

NAFCU Vice President of Legislative Affairs Brad Thaler told the committee in a letter that credit unions continue to try to work with members to improve products but warned that “any legislative efforts that eliminate overdraft protection programs are likely to have a significant negative impact on borrowers who value these programs.”

Support From Consumer Advocate 

However, a consumer advocate called on the House to pass the overdraft bill.

“Excessive overdraft fees take advantage of families when they experience tough times, making their lives even harder,” said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending.

In other action, the Financial Services Committee approved H.R 8485—legislation that would require lenders to consider additional credit worthiness information that is not typically found on a credit report in the underwriting process.

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