Senator Dodd Offers Legislation to Protect Against Bank Fees

In an effort to protect the average bank customer from sometimes-hefty bank overdraft fees, Senator Christopher Dodd, D-Connecticut, has introduced legislation that would make bank overdraft protection option. Current standards have banks automatically enrolling customers in such programs, which allow those using check cards or checks to make payments to spend more money than is actually available in their accounts. While the so-called "protection" can be convenient, it typically is associated with a fee in the range of $25 to $35 for each payment, even when the overdraft amount is significantly lower than the penalty itself.

Said Dodd, "At a time when many can afford it least, American consumers are being hit with hundreds of dollars in penalties for overdrawing on their account by just a few dollars. Banks should not be trying to bolster their profits at the expense of their customers." Several banks have already changed the way they do business in anticipation of legislation, including lowering fees and allowing customer to opt-out of overdraft protection.

Among the provision in Dodd’s proposed legislation are requirements for customer consent prior to enrolling them in overdraft protection programs, limiting the number of overdraft fees a bank can charge per year, requiring that ATM and teller transactions warn of transactions that will result in overdraft fees and a provision that would require overdraft fees to be proportionate to the cost of processing the overdraft. Said Senator Sherrod Brown, D-Ohio, of the legislation, "Taxpayers helped stabilize the financial services industry. Big banks should not return the favor by slamming consumers will billions of dollars in overdraft fees."