Sen. Dodd calls to curb overdraft fees
WASHINGTON — Sen. Christopher Dodd, chairman of the Banking Committee, said Thursday he wants to curb overdraft fees charged by banks, a move that would cut into a lucrative revenue stream for the financial industry.
Dodd, D-Conn., said he will propose legislation that would require customers to sign up for overdraft protection. If they don’t, a bank would not be allowed to charge a fee even if the customer overspends.
Under this scenario, banks are likely to deny charges that would exceed a person’s credit limit.
Congress passed a similar provision this spring as part of a credit card bill, which will take effect in February.
“Excessive, automatic overdraft fees are forcing many American families deeper into debt at a time when they are already struggling to make ends meet,” said Dodd.
Regulators and consumer protection advocates also have decried overdraft fees as unfairly targeting consumers.
Speaking to students at Georgetown University’s McDonough School of Business Friday, Federal Deposit Insurance Corp. Chairman Sheila Bair said the next generation of bankers must help customers “believe they’re getting a fair shake.”
“You need to give them mortgages they can afford and credit cards they can understand, small-dollar loans at reasonable rates, checking accounts without those usurious overdraft fees,” Bair said.
The Center for Responsible Lending estimates that consumers pay some $17.5 billion in overdraft fees a year.
President Barack Obama wants to create a new consumer protection agency that would monitor bank fees, including overdraft charges, and determine whether they fair. Republicans and some Democrats, however, oppose creation of the agency because they say it could unfairly burden community banks.
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Associated Press writer Daniel Wagner contributed to this report.
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