To extend the protections of the Truth in Lending Act to overdraft protection programs and services provided by depository institutions, to require customer consent before a depository institution may initiate overdraft protection services and fees, to enhance the information made available to consumers relating to overdraft protection services and fees, to prohibit systematic manipulation in the posting of checks and other debits to a depository account for the purpose of generating overdraft protection fees, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Consumer Overdraft Protection Fair 
Practices Act''.

SEC. 2. RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS OR SERVICES.

    (a) Truth in Lending Act Amendments.--
            (1) Definition.--Section 103 of the Truth in Lending Act 
        (15 U.S.C. 1602) is amended by adding at the end the following 
        new subsection:
    ``(cc) Terms Relating to Short-Term Extensions of Credit Under 
Overdraft Protection Programs.--
            ``(1) Overdraft protection fee.--The term `overdraft 
        protection fee' means any fee or charge imposed in connection 
        with any account on which checks or other debits are paid by 
        the institution in which such account is held even though there 
        are insufficient funds in the account to cover such checks or 
        other debits, unless such fee or charge--
                    ``(A) is imposed on an incidental basis as a 
                customer accommodation and no more than 3 such 
                overdraft fees are imposed during any calendar year;
                    ``(B) is imposed in connection with an extension of 
                credit through an overdraft line of credit program 
                where such fee or charge was considered a finance 
                charge under this title, as in effect immediately prior 
                to the enactment of the Consumer Overdraft Protection 
                Fair Practices Act; or
                    ``(C) has been disclosed in connection with a 
                program under which the overdraft is covered by funds 
                transferred from another deposit, share, or other asset 
                account.
            ``(2) Other terms.--
                    ``(A) Check.--The term `check' has the same meaning 
                as in section 3(6) of the Check Clearing for the 21st 
                Century Act.
                    ``(B) Other debits.--The term `other debits' 
                includes withdrawals from an account by the consumer 
                through an automated teller machine and electronic fund 
                transfers from an account that are initiated or 
                authorized by the consumer.
                    ``(C) Electronic fund transfer.--The term 
                `electronic fund transfer' has the same meaning as in 
                section 903.
                    ``(D) Account.--The term `account' means any 
                account intended for use by and generally used by a 
                consumer primarily for personal, family, or household 
                purposes into which the consumer deposits funds.
                    ``(E) Transaction account.--The term `transaction 
                account' has the same meaning as in section 19(b)(1)(C) 
                of the Federal Reserve Act.''.
            (2) Restrictions on overdraft protection programs or 
        services.--
                    (A) In general.--Chapter 2 of the Truth in Lending 
                Act (15 U.S.C. 1631 et seq.) is amended by adding at 
                the end the following new section:
``Sec. 140A. Restrictions on overdraft protection programs or services
    ``(a) In General.--In the case of any transaction account of a 
consumer at any institution, no overdraft protection fee may be imposed 
on such account for any extension of funds by the institution to cover 
any check or other debit for which there are insufficient funds in the 
consumer's account to pay such check or other debit, unless--
            ``(1) the consumer has provided specific written consent to 
        any program or service that provides for charging of such fees 
        in connection with any such extension of funds;
            ``(2) such fee is imposed pursuant to the terms of a 
        written agreement with the consumer which discloses, in a clear 
        and conspicuous manner--
                    ``(A) the amount of any fee imposed in connection 
                with paying an overdraft;
                    ``(B) any applicable disclosure required by this 
                title in connection with such extension of credit, 
                including the disclosures required by section 127;
                    ``(C) the categories of transactions for which a 
                fee for payment of an overdraft may be imposed, 
                including whether an overdraft created by withdrawals 
                at automated teller machines or other electronic fund 
                transfers will be covered and a fee imposed;
                    ``(D) the time period by which the consumer must 
                repay or cover any extension of credit in the form of 
                payment of an overdraft; and
                    ``(E) the circumstances under which the institution 
                in which an account is held will not pay an overdraft; 
                and
                    ``(F) other information required to be disclosed by 
                regulation;
            ``(3) such fee is separately and conspicuously disclosed, 
        each time the fee is imposed, in any periodic statement 
        provided to the consumer with respect to such account and is 
        included in the calculation of the annual percentage rate as 
        required by sections 107 and 127(b)(6).
    ``(b) Clarification Relating to Overdraft Fees.--In the case of any 
transaction account of a consumer at any institution, the prohibition 
against an overdraft protection fee under subsection (a) shall apply 
regardless of whether the amount of such fee is the same as, or less 
than, any fee imposed by the institution with respect to such account 
for a check or other debit that is returned unpaid.
    ``(c) Prohibition on Misrepresentations.--If any institution--
            ``(1) will not extend funds under specific circumstances to 
        cover an overdraft in any transaction account of a consumer at 
        the institution; or
            ``(2) reserves the right to extend funds to pay any such 
        overdraft on a discretionary basis,
any representation by such institution that the institution will extend 
credit to cover all overdrafts on such account shall be a violation of 
this title.''.
                    (B) Clerical amendment.--The table of sections for 
                chapter 2 of the Truth in Lending Act is amended by 
                inserting after the item relating to section 140 the 
                following new item:

``140A. Restrictions on overdraft protection programs or services.''.
            (3) Restrictions on advertising of overdraft protection 
        programs or services.--
                    (A) In general.--Chapter 3 of the Truth in Lending 
                Act (15 U.S.C. 1661 et seq.) is amended by adding at 
                the end the following new section:
``Sec. 148. Restrictions on advertising of overdraft protection 
              programs or services
    ``(a) In General.--In the case of an institution that maintains 
transaction accounts for consumers and offers a program or service 
under which the institution pays any overdraft on the account in 
exchange for payment of an overdraft protection fee, the institution 
may not make any of the following representations or statements with 
respect to such program or service in any advertisement or promotion:
            ``(1) Any representation or statement describing a 
        transaction account as free or no cost if the account includes, 
        or is promoted as including, overdraft protection services that 
        involve the payment of overdraft protection fees.
            ``(2) Any representation or statement encouraging use of 
        the account as a service to meet short-term credit needs or to 
        obtain advances on a consumer's next payment of salary, wages, 
        benefits, or other income.
            ``(3) Any representation or statement that the financial 
        institution will honor all checks or other debits presented 
        against the account, if the institution retains discretion at 
        any time not to honor any check or other debit presented.
    ``(b) Regulations.--The Board shall prescribe regulations 
implementing the restrictions set forth in subsection (a) pursuant to 
the authority of the Board under section 18(f) of the Federal Trade 
Commission Act, and may, by regulation or order, restrict such 
additional acts or practices that the Board finds to be unfair or 
deceptive in connection with the offering, operation, and advertising 
of overdraft protection programs and services.''.
                    (B) Clerical amendment.--The table of sections for 
                chapter 3 of the Truth in Lending Act is amended by 
                inserting after the item relating to section 147 the 
                following new item:

``148. Restrictions on advertising of overdraft protection programs or 
                            services.''.
            (4) Clarification of finance charge.--Section 106(a) of the 
        Truth in Lending Act (15 U.S.C. 1605(a)) is amended by adding 
        at the end the following new paragraph:
            ``(7) Overdraft protection fee.''.
    (b) Electronic Fund Transfer Act Amendments.--Section 904 of the 
Electronic Fund Transfer Act (15 U.S.C. 1693b) is amended by adding at 
the end the following new subsection:
    ``(e) Restrictions on Overdraft Protection Services and Fees.--
            ``(1) In general.--A financial institution that holds a 
        consumer's account may not impose an overdraft protection fee 
        on the account in connection with any payment of an electronic 
        fund transfer initiated by the consumer at an automated teller 
        machine in spite of a lack of sufficient funds in the 
        consumer's account to pay such electronic fund transfer, 
        unless--
                    ``(A) the consumer has affirmatively requested such 
                service pursuant to section 140(a)(1), including 
                specific consent to allowing overdrafts at an automated 
                teller machine or by debit card at a point-of-sale 
                terminal;
                    ``(B) the financial has provided a notice to the 
                consumer after the transaction is initiated and before 
                the consumer is irrevocably committed to completing the 
                transaction, that the electronic fund transfer the 
                consumer has requested will result in an overdraft 
                protection fee, together with the amount of any such 
                fee;
                    ``(C) the consumer elects to continue in the manner 
                necessary to effect the requested electronic fund 
                transfer after receiving such notice; and
                    ``(D) the overdraft protection fee imposed in 
                connection with such transaction is clearly disclosed 
                in the written documentation of the electronic fund 
                transfer required by section 906(a).
            ``(2) Prohibition on fee in absence of notice.--If the 
        notice required by paragraph (1)(B) is not feasible, the 
        financial institution may not charge an overdraft protection 
        fee in connection with any payment of an electronic fund 
        transfer initiated by the consumer at an automated teller 
        machine or by debit card at a point-of-sale terminal in spite 
        of a lack of sufficient funds in the consumer's account to pay 
        such electronic fund transfer.
            ``(3) Disclosure of account balances.--In the case of any 
        financial institution that offers a program or service under 
        which the institution pays any overdraft on a consumer's 
        account in exchange for the imposition of an overdraft 
        protection fee in accordance with paragraph (1), the financial 
        institution shall, in response to a balance inquiry initiated 
        by the consumer at an automated teller machine operated by the 
        financial institution, disclose only the actual dollar balance 
        in the consumer's account at the time of the request, which 
        shall not include any additional amount of credit or overdraft 
        protection the financial institution will pay under any 
        agreement with the consumer that permits the imposition of the 
        overdraft protection fee.
            ``(4) Overdraft protection fee defined.--For purposes of 
        this subsection, the term `overdraft protection fee' has the 
        same meaning as in section 103(cc)(1).''.
    (c) Expedited Funds Availability Act Amendments.--
            (1) Definition.--Section 602 of the Expedited Funds 
        Availability Act (12 U.S.C. 4001) is amended by adding at the 
        end the following new paragraph:
            ``(26) Overdraft protection fee.--The term `overdraft 
        protection fee' has the same meaning as in section 103(cc)(1) 
        of the Truth in Lending Act.''.
            (2) Restrictions on overdraft protection fees.--Section 607 
        of the Expedited Funds Availability Act (12 U.S.C. 4006) is 
        amended by adding at the end the following new subsection:
    ``(f) Restrictions on Overdraft Protection Fees.--A depository 
institution may not--
            ``(1) impose an overdraft protection fee on an account at 
        such institution for paying any check drawn on the account in 
        spite of a lack of sufficient funds in the account to pay such 
        check or any similar activity unless the accountholder has 
        affirmatively requested such service pursuant to section 
        140(a)(1) of the Truth in Lending Act; or
            ``(2) engage in a pattern or practice of delaying the 
        posting of any deposit in an account, or manipulating the 
        process of posting any check or other debit against an account, 
        if such pattern or practice results in 1 or more overdrafts 
        that trigger payment by the accountholder of an overdraft 
        protection fee.''.

Summary: Consumer Overdraft Protection Fair Practices Act - Amends the Truth in Lending Act to set forth restrictions upon overdraft protection fees or services placed upon a consumer account in order to cover any debit due to insufficient funds in such account. Prohibits certain misrepresentations made by an institution that it will extend credit to cover all overdrafts. Prohibits specified advertising claims regarding overdraft protection programs or services, including any representation or statement encouraging use of the account as a service to: (1) meet short-term credit needs. Or (2) obtain advances on a consumer's next payment of salary, wages, benefits, or other income. Authorizes the Board of Governors of the Federal Reserve System to restrict additional acts or practices the Board deems unfair or deceptive in connection with the offering, operation, and advertising of overdraft protection programs and services. Amends the Electronic Fund Transfer Act to set forth restrictions governing overdraft protection services and fees concerning payment of an electronic fund transfer initiated by the consumer at an automated teller machine (ATM) despite of a lack of sufficient funds in the consumer's account. Amends the Expedited Funds Availability Act to prohibit a depository institution from: (1) imposing overdraft protection fees for paying any check drawn on the account in spite of a lack of sufficient funds unless the account holder has affirmatively requested such service. Or (2) engaging in a pattern or practice of delaying the posting of any deposit in an account, or manipulating the process of posting any check or other debit against an account, if such pattern or practice results in an overdraft that triggers payment of an overdraft protection fee.