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Senators Cory Booker and Sherrod Brown are reviving a 2018 bill to eliminate banking overdraft charges, as reported by Vox this week. The Stop Overdraft Profiteering Act would stop banks from imposing overdraft fees on debit card purchases and from charging insufficient fund fees at ATMs. Check-related overdraft fees would be limited to one per month, with a maximum of six overdraft fees per year. Additionally, banks wouldn’t be allowed to rearrange transaction orders to maximize the fees they collect.
Here’s Li Zhou from Vox, who got an early look at the revived proposal, discussing the potential impact of the bill:
If the bill were to succeed in eliminating overdraft fees, several things might occur. More customers could face outright declined transactions, meaning they couldn’t complete purchases, but they also wouldn’t be hit with surprise fees. Banks might also start treating withdrawals in the same way as credit—by imposing an interest charge instead.
Since 2010, customers have had to opt in for overdraft protection and its related fees. A 2018 review of overdraft practices by Booker’s office revealed that, of the 13 banks that responded, only Bank of America does not charge overdraft fees for debit card purchases. However, it still imposes a $35 fee for each overdraft, with a cap of four overdrafts per day. Chase, in contrast, doesn’t charge overdraft fees for ATM withdrawals, but it does charge $34 per overdraft, with a maximum of three per day. Regions and SunTrust charge $36 per overdraft, up to six times per account each day, while TD Bank can charge you $35 as much as five times a day.
And don’t forget about the extended overdraft fee. This is the charge that kicks in once your account remains overdrawn for a set number of consecutive days. While some banks, such as Regions and Wells Fargo, don’t impose extended overdraft fees, others do. For example, SunTrust and US Bank charge $36 after seven consecutive overdrawn days, and BB&T charges $8 per day after seven consecutive overdrawn days.
If these figures seem unfamiliar and you’re feeling a bit nervous, be aware that banks have the ability to reorder transactions, which can increase the number of overdraft occurrences. These fees can accumulate even in a single day, as they are charged per individual transaction.
Even customers who have linked a savings account to their checking account to avoid overdraft fees may still face fees for using this service to prevent overdrafts.
The CFPB reported in 2017 that individuals who overdrew their accounts with overdraft protection at least ten times in a 12-month period paid an additional $450 in fees. During that time, the bureau introduced four overdraft disclosure prototypes in an effort to make overdraft fees and protection programs more transparent. However, since Richard Cordray left as director, the CFPB has allowed a number of issues to remain unresolved.
Zhou points out that the bill “has little chance of passing in a Congress controlled by Republicans,” but it could still pressure banks to alter their practices. Additionally, Booker is one of about 74 Democrats running for president, so even if the bill is once again stalled in committee, it serves as publicity that reminds us he is A Very Good Guy who genuinely cares about those burdened by fees.
In the meantime, familiarize yourself with the fees at your bank. Make sure to review the fees for your specific account type instead of just Googling “Bank of Money + fees.” Your account may have a complicated name like Basic Fundamental Checking for Commoners or something equally intricate. Find out how to opt out of your bank’s overdraft service if you’ve been a repeat overdraft offender and prefer declined transactions over paying fees. And don’t forget to check your bank balance! Frequently! Maybe once a day! Just in case!
Updated May 28, 2019, 6 p.m. Eastern: This post previously mentioned that Bank of America charges an extended overdraft fee. A company representative clarified that the bank eliminated that fee in 2017.
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