Creates the consumer overdraft protection act

Title of bill

An act to amend the banking law, in relation to creating the consumer overdraft protection act

Purpose

This legislation will establish appropriate protections for consumers regarding overdraft fees.

Summary of provisions

This bill amends the banking law by adding article 2-A to be cited as the "Consumer Overdraft Protection Act". It limits overdraft fees over the course of one year to no more than one hundred dollars, including any additional charges and/or fees imposed.

The bill also requires every financial institution to establish an automatic bounce system for any amount exceeding the limit prescribed above, and thus regardless of how the financial transaction is executed -- check, electronic fund transfer, automated teller machine -- the consumer is protected.

Any financial institution may require a monthly fee of one dollar for any checking account for the maintenance of an automatic bounce system. Such fee must be disclosed pursuant to subdivision one of this section.

Existing law

Existing law imposes no such duties on financial institutions.

Justification

This bill intends to restore trust between banks and consumers. Overdraft fees are a serious burden to poor and working families who end up with piles of debt they can't afford to pay, thus damaging their credit scores and costing banks money that could have been saved. This bill addresses the issue by limiting the allowable overdraft amount to one hundred dollars annually on checking accounts while requiring every financial institution to establish an automatic bounce system for any transaction beyond that limit.

As we put a cap on the interest rate for a credit card, so too should we protect the most vulnerable class in our society, the poor and working families, from excessive overdraft fees. In this digital age, a checking account should not be considered a luxury. Rather, it's the only way poor and working families can keep their money safe and execute basic transactions.

This bill follows the FDIC study "outrageous overdraft fees" and echoes The Consumer Overdraft Protection Fair Practices Act, introduced in Congress by Rep. Carolyn Maloney-NY.

The Empire State must lead the way in preventing these embarrassing situations and creating fairer practices.

Legislative history

2013-14: A6844 Referred to Banks

Fiscal implications

None

Local fiscal implications

None

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become a law.