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Overdraft plans Hill and agency updates
WASHINGTON (3/11/09)—Rep. Carolyn Maloney (D-N.Y.) is asking her House colleagues to support a 2009 version of her legislation intended to afford consumers more protections in financial institution overdraft protection services. The 2009 bill will be similar to Maloney’s Consumer Overdraft Protection Fair Practices Act (H.R. 946), which was introduced in 2007 but died with the closing session of the last Congress as it failed to get a House vote. That bill would have: ensured that consumers opt-in to potentially costly overdraft protections, rather than being forced into them without notification; required that consumers are alerted when they about to overdraw from their account at ATMs; and required that financial institutions provide full, written disclosure of their overdraft policies to customers or members. The Credit Union National Association (CUNA) staunchly backed the bill’s intention to eliminate abusive practices associated with some overdraft, or bounce, protection plans. However, CUNA opposed the bill's approach of classifying overdraft protection programs under the Truth in Lending Act, and including the service fee associated with overdraft protection programs as a finance charge included in an APR calculation. That approach, CUNA warned, could prevent credit unions from offering overdraft protection plans for fear of exceeding the 18% lending ceiling that applies to federal credit unions. CUNA also had criticized some operational aspects of the bill. CUNA continues to work with key Hill staff and committee members on the overdraft issue and believes Maloney’s bill this year will be pared down from its earlier version. Maloney is a member of the House Financial Services Committee, as well as chairman of the Joint Economic Committee. On the regulatory side, in December 2008, the National Credit Union Administration (NCUA) had proposed, in conjunction with the Federal Reserve Board and Office of Thrift Supervision, a couple of revisions affecting overdraft protections. They would have addressed such things as members' opt-out rights, disclosures and overdrafts due to debit holds. The overdraft plan was issued along with credit card reforms. However, when the Fed voted on its card reforms, it stripped out the overdraft language and issued a revised proposal. Comments are due March 30. The NCUA has said it would take no further action on the overdraft proposal because, if adopted, the Fed plan would cover the activities of federal credit unions. In a related story, the Fed Consumer Advisory Council, meeting March 26, has scheduled discussion on the overdraft proposed rules as one of its agenda items (see related story: 'Bounce’ protection, foreclosures on Fed consumer panel list). Use the resource link below to access CUNA’s comment call on the overdraft proposal.
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