I 

109TH CONGRESS 

1ST SESSION H. R. 3449

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. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 27, 2005

Mrs. MALONEY (for herself, Mr. SANDERS, Mr. FRANK of Massachusetts, and 

Ms. LEE) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL

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.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Consumer Overdraft 

5 Protection Fair Practices Act’’. 

6 SEC. 2. RESTRICTIONS ON OVERDRAFT PROTECTION PRO7 GRAMS OR SERVICES. 

8 (a) TRUTH IN LENDING ACT AMENDMENTS.—

9 (1) DEFINITION.—Section 103 of the Truth in 

10 Lending Act (15 U.S.C. 1602) is amended by add11 ing at the end the following new subsection: 

12 ‘‘(cc) TERMS RELATING TO SHORT-TERM EXTEN13 SIONS OF CREDIT UNDER OVERDRAFT PROTECTION PRO14 GRAMS.—

15 ‘‘(1) OVERDRAFT PROTECTION FEE.—The term 

16 ‘overdraft protection fee’ means any fee or charge 

17 imposed in connection with any account on which 

18 checks or other debits are paid by the institution in 

19 which such account is held even though there are in20 sufficient funds in the account to cover such checks 

21 or other debits, unless such fee or charge—

22 ‘‘(A) is imposed on an incidental basis as 

23 a customer accommodation and no more than 3 

24 such overdraft fees are imposed during any cal25 endar year; 
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1 ‘‘(B) is imposed in connection with an ex2 tension of credit to a transaction account of a 

3 consumer under a written open end consumer 

4 credit plan the purpose of which is to cover any 

5 check presented against, electronic fund trans6 fer from, or other debit of the account for the 

7 payment of which there are insufficient funds in 

8 the account; or 

9 ‘‘(C) has been disclosed in connection with 

10 a program under which the overdraft is covered 

11 by funds transferred from another deposit, 

12 share, or other asset account. 

13 ‘‘(2) OTHER TERMS.—

14 ‘‘(A) CHECK.—The term ‘check’ has the 

15 same meaning as in section 3(6) of the Check 

16 Clearing for the 21st Century Act. 

17 ‘‘(B) OTHER DEBITS.—The term ‘other 

18 debits’ includes withdrawals from an account by 

19 the consumer through an automated teller ma20 chine and electronic fund transfers from an ac21 count that are initiated or authorized by the 

22 consumer. 

23 ‘‘(C) ELECTRONIC FUND TRANSFER.—The 

24 term ‘electronic fund transfer’ has the same 

25 meaning as in section 903. 
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1 ‘‘(D) ACCOUNT.—The term ‘account’ 

2 means any account intended for use by and 

3 generally used by a consumer primarily for per4 sonal, family, or household purposes into which 

5 the consumer deposits funds. 

6 ‘‘(E) TRANSACTION ACCOUNT.—The term 

7 ‘transaction account’ has the same meaning as 

8 in section 19(b)(1)(C) of the Federal Reserve 

9 Act.’’. 

10 (2) RESTRICTIONS ON OVERDRAFT PROTECTION

11 PROGRAMS OR SERVICES.—

12 (A) IN GENERAL.—Chapter 2 of the Truth 

13 in Lending Act (15 U.S.C. 1631 et seq.) is 

14 amended by adding at the end the following 

15 new section: 

16 ‘‘§ 140. Restrictions on overdraft protection programs 

17 or services 

18 ‘‘(a) IN GENERAL.—In the case of any transaction 

19 account of a consumer at any institution, no overdraft pro20 tection fee may be imposed on such account for any exten21 sion of funds by the institution to cover any check or other 

22 debit for which there are insufficient funds in the con23 sumer’s account to pay such check or other debit, unless—

24 ‘‘(1) the consumer has provided specific written 

25 consent to any program or service that provides for 
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1 charging of such fees in connection with any such 

2 extension of funds; 

3 ‘‘(2) such fee is imposed pursuant to the terms 

4 of a written agreement with the consumer which dis5 closes, in a clear and conspicuous manner—

6 ‘‘(A) the amount of any fee imposed in 

7 connection with paying an overdraft; 

8 ‘‘(B) any applicable disclosure required by 

9 this title in connection with such extension of 

10 credit, including the amount of the finance 

11 charge in connection with such fee or fees, as 

12 required by section 106; 

13 ‘‘(C) the categories of transactions for 

14 which a fee for payment of an overdraft may be 

15 imposed, including whether an overdraft created 

16 by withdrawals at automated teller machines or 

17 other electronic fund transfers will be covered 

18 and a fee imposed; 

19 ‘‘(D) the time period by which the con20 sumer must repay or cover any extension of 

21 credit in the form of payment of an overdraft; 

22 and 

23 ‘‘(E) the circumstances under which the 

24 institution in which an account is held will not 

25 pay an overdraft; and 
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1 ‘‘(F) other information required to be dis2 closed by regulation; 

3 ‘‘(3) such fee is separately and conspicuously 

4 disclosed, each time the fee is imposed, in any peri5 odic statement provided to the consumer with re6 spect to such account. 

7 ‘‘(b) CLARIFICATION RELATING TO OVERDRAFT

8 FEES.—In the case of any transaction account of a con9 sumer at any institution, the prohibition against an over10 draft protection fee under subsection (a) shall apply re11 gardless of whether the amount of such fee is the same 

12 as, or less than, any fee imposed by the institution with 

13 respect to such account for a check or other debit that 

14 is returned unpaid. 

15 ‘‘(c) PROHIBITION ON MISREPRESENTATIONS.—If 

16 any institution—

17 ‘‘(1) will not extend funds under specific cir18 cumstances to cover an overdraft in any transaction 

19 account of a consumer at the institution; or 

20 ‘‘(2) reserves the right to extend funds to pay 

21 any such overdraft on a discretionary basis, 

22 any representation by such institution that the institution 

23 will extend credit to cover all overdrafts on such account 

24 shall be a violation of this title.’’. 
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1 (B) CLERICAL AMENDMENT.—The table of 

2 sections for chapter 2 of the Truth in Lending 

3 Act is amended by inserting after the item re4 lating to section 139 the following new item:

‘‘140. Restrictions on overdraft protection programs or services.’’.

5 (3) RESTRICTIONS ON ADVERTISING OF OVER6 DRAFT PROTECTION PROGRAMS OR SERVICES.—

7 (A) IN GENERAL.—Chapter 3 of the Truth 

8 in Lending Act (15 U.S.C. 1661 et seq.) is 

9 amended by adding at the end the following 

10 new section: 

11 ‘‘§ 148. Restrictions on advertising of overdraft pro12 tection programs or services 

13 ‘‘(a) IN GENERAL.—In the case of an institution that 

14 maintains transaction accounts for consumers and offers 

15 a program or service under which the institution pays any 

16 overdraft on the account in exchange for payment of an 

17 overdraft protection fee, the institution may not make any 

18 of the following representations or statements with respect 

19 to such program or service in any advertisement or pro20 motion: 

21 ‘‘(1) Any representation or statement describing 

22 a transaction account as free or no cost if the ac23 count includes, or is promoted as including, over24 draft protection services that involve the payment of 

25 overdraft protection fees. 
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1 ‘‘(2) Any representation or statement encour2 aging use of the account as a service to meet short3 term credit needs or to obtain advances on a con4 sumer’s next payment of salary or wages. 

5 ‘‘(3) Any representation or statement that the 

6 financial institution will honor all checks or other 

7 debits presented against the account, if the institu8 tion retains discretion at any time not to honor any 

9 check or other debit presented. 

10 ‘‘(4) Any representation or statement that con11 sumers may overdraw their accounts and maintain a 

12 negative balance, if the terms of the account require 

13 the consumer to promptly repay or cover any over14 draft. 

15 ‘‘(b) REGULATIONS.—The Board shall prescribe reg16 ulations implementing the restrictions set forth in sub17 section (a) pursuant to the authority of the Board under 

18 section 18(f) of the Federal Trade Commission Act, and 

19 may, by regulation or order, restrict such additional acts 

20 or practices that the Board finds to be unfair or deceptive 

21 in connection with the offering, operation, and advertising 

22 of overdraft protection programs and services.’’. 

23 (B) CLERICAL AMENDMENT.—The table of 

24 sections for chapter 3 of the Truth in Lending 
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1 Act is amended by inserting after the item re2 lating to section 147 the following new item:

‘‘148. Restrictions on advertising of overdraft protection programs or services.’’.

3 (4) CLARIFICATION OF FINANCE CHARGE.—

4 Section 106(a) of the Truth in Lending Act (15 

5 U.S.C. 1605(a)) is amended by adding at the end 

6 the following new paragraph: 

7 ‘‘(7) Overdraft protection fee.’’. 

8 (b) ELECTRONIC FUND TRANSFER ACT AMEND9 MENTS.—Section 904 of the Electronic Fund Transfer 

10 Act (15 U.S.C. 1693b) is amended by adding at the end 

11 the following new subsection: 

12 ‘‘(e) RESTRICTIONS ON OVERDRAFT PROTECTION

13 SERVICES AND FEES.—

14 ‘‘(1) IN GENERAL.—A financial institution that 

15 holds a consumer’s account may not impose an over16 draft protection fee on the account in connection 

17 with any payment of an electronic fund transfer ini18 tiated by the consumer at an automated teller ma19 chine operated by the financial institution in spite of 

20 a lack of sufficient funds in the consumer’s account 

21 to pay such electronic fund transfer, unless—

22 ‘‘(A) the consumer has affirmatively re23 quested such service pursuant to section 

24 140(a)(1); 
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1 ‘‘(B) the financial has provided a notice to 

2 the consumer, on the screen of the automated 

3 teller machine, or on a paper notice issued from 

4 such machine, after the transaction is initiated 

5 and before the consumer is irrevocably com6 mitted to completing the transaction, that the 

7 electronic fund transfer the consumer has re8 quested may initiate an overdraft protection fee, 

9 together with the amount of any such fee; 

10 ‘‘(C) the consumer elects to continue in the 

11 manner necessary to effect the requested elec12 tronic fund transfer after receiving such notice; 

13 and 

14 ‘‘(D) the overdraft protection fee imposed 

15 in connection with such transaction is clearly 

16 disclosed in the written documentation of the 

17 electronic fund transfer required by section 

18 906(a). 

19 ‘‘(2) DISCLOSURE OF ACCOUNT BALANCES.—In 

20 the case of any financial institution that offers a 

21 program or service under which the institution pays 

22 any overdraft on a consumer’s account in exchange 

23 for the imposition of an overdraft protection fee in 

24 accordance with paragraph (1), the financial institu25 tion shall, in response to a balance inquiry initiated 
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1 by the consumer at an automated teller machine op2 erated by the financial institution, disclose only the 

3 actual dollar balance in the consumer’s account at 

4 the time of the request, which shall not include any 

5 additional amount of credit or overdraft protection 

6 the financial institution will pay under any agree7 ment with the consumer that permits the imposition 

8 of the overdraft protection fee. 

9 ‘‘(3) OVERDRAFT PROTECTION FEE DE10 FINED.—For purposes of this subsection, the term 

11 ‘overdraft protection fee’ has the same meaning as 

12 in section 103(cc)(1).’’. 

13 (c) EXPEDITED FUNDS AVAILABILITY ACT AMEND14 MENTS.—

15 (1) DEFINITION.—Section 602 of the Expedited 

16 Funds Availability Act (12 U.S.C. 4001) is amended 

17 by adding at the end the following new paragraph: 

18 ‘‘(26) OVERDRAFT PROTECTION FEE.—The 

19 term ‘overdraft protection fee’ has the same meaning 

20 as in section 103(cc)(1) of the Truth in Lending 

21 Act.’’. 

22 (2) RESTRICTIONS ON OVERDRAFT PROTECTION

23 FEES.—Section 607 of the Expedited Funds Avail24 ability Act (12 U.S.C. 4006) is amended by adding 

25 at the end the following new subsection: 
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1 ‘‘(f) RESTRICTIONS ON OVERDRAFT PROTECTION

2 FEES.—A depository institution may not—

3 ‘‘(1) impose an overdraft protection fee on an 

4 account at such institution for paying any check 

5 drawn on the account in spite of a lack of sufficient 

6 funds in the account to pay such check or any simi7 larly activity unless the accountholder has affirma8 tively requested such service pursuant to section 

9 140(a)(1) of the Truth in Lending Act; or 

10 ‘‘(2) engage in a pattern or practice of delaying 

11 the posting of any deposit in an account, or manipu12 lating the process of posting any check or other 

13 debit against an account, for the purpose of initi14 ating 1 or more overdrafts that trigger payment by 

15 the accountholder of an overdraft protection fee.’’. 

16 (d) FEDERAL RESERVE BOARD STUDY OF OVER17 DRAFT PROTECTION PROGRAMS OFFERED BY FINANCIAL

18 INSTITUTIONS.—

19 (1) STUDY REQUIRED.—

20 (A) IN GENERAL.—The Board of Gov21 ernors of the Federal Reserve System shall con22 duct a study of overdraft protection or avoid23 ance programs and services offered by financial 

24 institutions to determine the extent to which 

25 such programs or services are available to con-
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1 sumers, the differences in operation and cost of 

2 such programs or services, and the benefits and 

3 risks of such programs or services for con4 sumers. 

5 (B) AREAS FOR STUDY.—In conducting 

6 the study under subparagraph (A), the Board 

7 shall consider, among other issues—

8 (i) the criteria used by financial insti9 tutions in designing or selecting overdraft 

10 protection programs and services; 

11 (ii) the extent to which financial insti12 tutions exercise discretion on whether to 

13 not to cover an overdraft and criteria used 

14 in exercising such discretion; 

15 (iii) the adequacy of information pro16 vided to customers regarding alternative 

17 overdraft protection programs or services 

18 and the cost and terms of such programs 

19 and services; 

20 (iv) the adequacy of disclosures in 

21 promotions and advertising relating to 

22 overdraft protection services; 

23 (v) the extent to which overdraft pro24 tection programs and services are con25 ducted by third-party vendors, the basis 
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1 for structuring vendor compensation ar2 rangements for these programs and serv3 ices, and the impact, if any, of linking ven4 dor compensation to increases in fee rev5 enue on the quality and cost of overdraft 

6 protection services; and 

7 (vi) the feasibility of providing notice 

8 in connection with point of sale debit 

9 transactions that a transaction initiated by 

10 the consumer will result in an overdraft 

11 protection fee if completed by the con12 sumer and the potential benefit of such 

13 disclosure to consumers. 

14 (C) CONSULTATION REQUIRED.—The 

15 Board of Governors of the Federal Reserve Sys16 tem shall—

17 (i) consult with the other Federal 

18 banking agencies (as defined in section 3 

19 of the Federal Deposit Insurance Act) and 

20 the National Credit Union Administration 

21 Board in formulating and conducting the 

22 study required under subparagraph (A); 

23 and 

24 (ii) employ research methods and pro25 cedures, including consumer survey and 
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1 market tester programs, necessary to ad2 dress the issues required by subparagraph 

3 (B). 

4 (2) REPORT REQUIRED.—Before the end of the 

5 1-year period beginning on the date of the enact6 ment of this Act, the Board of Governors of the 

7 Federal Reserve System shall submit a report to the 

8 Committee on Banking, Housing and Urban Affairs 

9 of the Senate and the Committee on Financial Serv10 ices of the House of Representatives containing a 

11 detailed summary of the finding and conclusions of 

12 the study under this subsection, together with such 

13 recommendations for legislative or administrative ac14 tions as the Board may determine to be appropriate.

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