II 

111TH CONGRESS 

1ST SESSION S. 1799 

To amend the Truth in Lending Act, to establish fair and transparent 

practices related to the marketing and provision of overdraft coverage 

programs at depository institutions, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 19, 2009 

Mr. DODD (for himself, Mr. SCHUMER, Mr. REED, Mr. BROWN, Mr. LEVIN, 

Mr. MERKLEY, Mr. MENENDEZ, and Mr. REID) introduced the following 

bill; which was read twice and referred to the Committee on Banking, 

Housing, and Urban Affairs 

A BILL 

To amend the Truth in Lending Act, to establish fair and 

transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions, and for other purposes. 

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 ‘‘Fairness and Account5 ability in Receiving Overdraft Coverage Act of 2009’’ or 

6 the ‘‘FAIR Overdraft Coverage Act’’. 


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1 SEC. 2. FINDINGS AND PURPOSE. 

2 Section 102 of the Truth in Lending Act (15 U.S.C. 

3 1601) is amended by adding at the end the following: 

4 ‘‘(c) FAIRNESS AND ACCOUNTABILITY IN OVER5 DRAFT COVERAGE.— 

6 ‘‘(1) FINDINGS.—The Congress also finds 

7 that— 

8 ‘‘(A) overdraft coverage is a form of short9 term credit that depository institutions provide 

10 for consumer transaction accounts. Historically, 

11 depository institutions covered overdrafts for a 

12 fee on an ad hoc basis; 

13 ‘‘(B) with the growth in specially designed 

14 software programs and in consumer use of debit 

15 cards, overdraft coverage for a fee has become 

16 more prevalent; 

17 ‘‘(C) most depository institutions do not 

18 notify consumers when adding this feature to 

19 their transaction accounts, and some do not 

20 permit consumers to eliminate this feature from 

21 such accounts; 

22 ‘‘(D) most depository institutions collect a 

23 high flat fee, including for small dollar trans24 actions, each time the institution covers an 

25 overdraft, in some cases impose multiple over26 draft coverage fees within a single day, and 


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1 many charge additional fees for each day dur2 ing which the account remains overdrawn; and 

3 ‘‘(E) such abusive and misleading practices 

4 in connection with overdraft coverage fees have 

5 deprived consumers of meaningful choices about 

6 their accounts and placed significant financial 

7 burdens on low- and moderate-income con8 sumers. 

9 ‘‘(2) PURPOSE.—It is the purpose of this title 

10 to protect consumers by limiting abusive and mis11 leading overdraft coverage fees and practices, and by 

12 providing meaningful disclosures and consumer 

13 choice in connection with overdraft coverage fees.’’. 

14 SEC. 3. DEFINITIONS. 

15 (a) ADDITIONAL DEFINITIONS.—Section 103 of the 

16 Truth in Lending Act (15 U.S.C. 1602) is amended by 

17 adding at the end the following: 

18 ‘‘(cc) DEFINITIONS RELATING TO OVERDRAFT COV19 ERAGE.— 

20 ‘‘(1) CHECK.—The term ‘check’ has the same 

21 meaning as in section 3(6) of the Check Clearing for 

22 the 21st Century Act (12 U.S.C. 5001 et seq.), 

23 other than a travelers check. 

24 ‘‘(2) DEPOSITORY INSTITUTION.—The term ‘de25 pository institution’ has the same meaning as in 


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1 clauses (i) through (vi) of section 19(b)(1)(A) of the 

2 Federal Reserve Act (12 U.S.C. 461(b)(1)(A)). 

3 ‘‘(3) NONSUFFICIENT FUND FEE.—The term 

4 ‘nonsufficient fund fee’ means a fee or charge as5 sessed in connection with an overdraft for which a 

6 depository institution declines payment. 

7 ‘‘(4) OVERDRAFT.—The term ‘overdraft’ means 

8 the amount of a withdrawal by check or other debit 

9 from a transaction account in which there are insuf10 ficient or unavailable funds in the account to cover 

11 such check or debit. 

12 ‘‘(5) OVERDRAFT COVERAGE.—The term ‘over13 draft coverage’ means the payment of a check pre14 sented or other debit posted against a transaction 

15 account by the depository institution in which such 

16 account is held, even though there are insufficient or 

17 unavailable funds in the account to cover such 

18 checks or other debits. 

19 ‘‘(6) OVERDRAFT COVERAGE FEE.—The term 

20 ‘overdraft coverage fee’ means any fee or charge as21 sessed in connection with overdraft coverage, or in 

22 connection with any negative account balance that 

23 results from overdraft coverage, excluding fees or 

24 charges relating to overdraft lines of credit or trans25 fers from an account linked to another transaction 


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1 account or line of credit. Such fee shall be consid2 ered a ‘finance charge’ for purposes of section 

3 106(a), but shall not be included in the calculation 

4 of the rate of interest for purposes of section 

5 107(5)(A)(vi) of the Federal Credit Union Act (12 

6 U.S.C. 1757(5)(A)(vi)). 

7 ‘‘(7) OVERDRAFT COVERAGE PROGRAM.—The 

8 term ‘overdraft coverage program’ means a service 

9 under which a depository institution assesses an 

10 overdraft coverage fee for overdraft coverage. 

11 ‘‘(8) TRANSACTION ACCOUNT.—The term 

12 ‘transaction account’ has the same meaning as in 

13 section 19(b)(1)(C) of the Federal Reserve Act (12 

14 U.S.C. 461(b)(1)(C)).’’. 

15 (b) CONFORMING AMENDMENT.—Section 

16 107(5)(A)(vi) of the Federal Credit Union Act (12 U.S.C. 

17 1757(5)(A)(vi)) is amended by inserting ‘‘, other than an 

18 overdraft coverage fee, as defined in section 103(cc) of the 

19 Truth in Lending Act (12 U.S.C. 1602(cc))’’ after ‘‘inclu20 sive of all finance charges’’. 

21 SEC. 4. FAIR MARKETING AND PROVISION OF OVERDRAFT 

22 COVERAGE PROGRAMS. 

23 Chapter 2 of the Truth in Lending Act (15 U.S.C. 

24 1631 et seq.) is amended by adding at the end the fol25 lowing new section: 


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1 ‘‘SEC. 140B. OVERDRAFT COVERAGE PROGRAM DISCLO2 SURES AND CONSUMER PROTECTION. 

3 ‘‘(a) PROHIBITIONS.—No depository institution may 

4 engage in acts or practices in connection with the mar5 keting of or the provision of overdraft coverage that are 

6 unfair, deceptive, or designed to evade the provisions of 

7 this section. 

8 ‘‘(b) MARKETING DISCLOSURES.—Each depository 

9 institution that provides or offers to provide overdraft cov10 erage with respect to transaction accounts held at that de11 pository institution shall clearly and conspicuously disclose 

12 in all marketing materials for such overdraft coverage any 

13 overdraft coverage fees. 

14 ‘‘(c) CONSUMER CONSENT OPT-IN.—A depository in15 stitution may charge overdraft coverage fees with respect 

16 to withdrawals from automated teller machines or debit 

17 card transfers only if the consumer has consented in writ18 ing, in electronic form, or in such other form as is per19 mitted under regulations of the Board. 

20 ‘‘(d) CONSUMER DISCLOSURES.—Each depository in21 stitution shall clearly disclose to each consumer covered 

22 by an overdraft protection program of that depository in23 stitution— 

24 ‘‘(1) that— 

25 ‘‘(A) the consumer may be charged for not 

26 more than one overdraft coverage fee in any 


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1 single calendar month and not more than 6 

2 overdraft coverage fees in any single calendar 

3 year, per transaction account; and 

4 ‘‘(B) the depository institution retains the 

5 discretion to pay (without assessing an over6 draft coverage fee) or reject overdrafts incurred 

7 by the consumer beyond the numbers described 

8 in subparagraph (A); 

9 ‘‘(2) information about any alternative over10 draft products that are available, including a clear 

11 explanation of how the terms and fees for such alter12 native services and products differ; and 

13 ‘‘(3) such other information as the Board may 

14 require, by rule. 

15 ‘‘(e) PERIODIC STATEMENTS.—Each depository insti16 tution that offers an overdraft coverage program shall, in 

17 each periodic statement for any transaction account that 

18 has an overdraft coverage program feature, clearly disclose 

19 to the consumer the dollar amount of all overdraft cov20 erage fees charged to the consumer for the relevant period 

21 and year to date. 

22 ‘‘(f) EXCLUSION FROM ACCOUNT BALANCE INFOR23 MATION.—No depository institution may include the 

24 amount available under the overdraft coverage program of 


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1 a consumer as part of the transaction account balance of 

2 that consumer. 

3 ‘‘(g) PROMPT NOTIFICATION.—Each depository insti4 tution shall promptly notify consumers, through a reason5 able means selected by the consumer, when overdraft cov6 erage has been accessed with respect to the account of 

7 the consumer, not later than on the day on which such 

8 access occurs, including— 

9 ‘‘(1) the date of the transaction; 

10 ‘‘(2) the type of transaction; 

11 ‘‘(3) the overdraft amount; 

12 ‘‘(4) the overdraft coverage fee; 

13 ‘‘(5) the amount necessary to return the ac14 count to a positive balance; and 

15 ‘‘(6) whether the participation of a consumer in 

16 an overdraft coverage program will be terminated if 

17 the account is not returned to a positive balance 

18 within a given time period. 

19 ‘‘(h) TERMINATED OR SUSPENDED COVERAGE.— 

20 Each depository institution shall provide prompt notice to 

21 the consumer, using a reasonable means selected by the 

22 consumer, if the institution terminates or suspends access 

23 to an overdraft coverage program with respect to an ac24 count of the consumer, including a clear rationale for the 

25 action. 


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1 ‘‘(i) NOTICE AND OPPORTUNITY TO CANCEL.—Each 

2 depository institution shall— 

3 ‘‘(1) warn any consumer covered by an over4 draft coverage program who engages in a trans5 action through an automated teller machine or a 

6 branch teller if completing the transaction would 

7 trigger overdraft coverage fees, including the amount 

8 of the fees; and 

9 ‘‘(2) provide to the consumer the opportunity to 

10 cancel the transaction before it is completed. 

11 ‘‘(j) OVERDRAFT COVERAGE FEE LIMITS.— 

12 ‘‘(1) FREQUENCY.—A depository institution 

13 may charge not more than one overdraft coverage 

14 fee in any single calendar month, and not more than 

15 6 overdraft coverage fees in any single calendar 

16 year, per transaction account. 

17 ‘‘(2) REASONABLE AND PROPORTIONAL OVER18 DRAFT COVERAGE FEES.— 

19 ‘‘(A) IN GENERAL.—The amount of any 

20 overdraft coverage fee that a depository institu21 tion may assess for paying a transaction (in22 cluding a check or other debit) shall be reason23 able and proportional to the cost of processing 

24 the transaction. 


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1 ‘‘(B) SAFE HARBOR RULE AUTHORIZED.— 

2 The Board, in consultation with the Comp3 troller of the Currency, the Board of Directors 

4 of the Federal Deposit Insurance Corporation, 

5 the Director of the Office of Thrift Supervision, 

6 and the National Credit Union Administration 

7 Board, may issue rules to provide an amount 

8 for any overdraft coverage fee that is presumed 

9 to be reasonable and proportional to the actual 

10 cost of processing the transaction. 

11 ‘‘(3) POSTING ORDER.—In order to minimize 

12 overdraft coverage fees charged to consumers, each 

13 depository institution shall post transactions with re14 spect to transaction accounts in such a manner that 

15 the consumer does not incur avoidable overdraft cov16 erage fees. 

17 ‘‘(k) DEBIT HOLDS.—No depository institution may 

18 charge an overdraft coverage fee on any category of trans19 action, if the overdraft results solely from a debit hold 

20 amount placed on a transaction account that exceeds the 

21 actual dollar amount of the transaction. 

22 ‘‘(l) NONDISCRIMINATION FOR NOT OPTING IN.—In 

23 implementing the requirements of this section, each depos24 itory institution shall provide to consumers who have not 

25 consented to participate in an overdraft coverage program, 


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1 transaction accounts having the same terms, conditions, 

2 or other features as those that are provided to consumers 

3 who have consented to participate in such overdraft cov4 erage program, except for features of such overdraft cov5 erage. 

6 ‘‘(m) NON-SUFFICIENT FUND FEE LIMITS.—No de7 pository institution may charge any non-sufficient fund fee 

8 with respect to— 

9 ‘‘(1) any transaction at an automated teller ma10 chine; or 

11 ‘‘(2) any debit card transaction. 

12 ‘‘(n) REPORTS TO CONSUMER REPORTING AGEN13 CIES.—No depository institution may report negative in14 formation regarding the use of overdraft coverage by a 

15 consumer to any consumer reporting agency (as that term 

16 is defined in section 603 of the Fair Credit Reporting Act 

17 (15 U.S.C. 1681a)) when the overdraft amounts and over18 draft coverage fees are paid under the terms of an over19 draft coverage program. 

20 ‘‘(o) RULE OF CONSTRUCTION.—No provision of this 

21 section may be construed as prohibiting a depository insti22 tution from retaining the discretion to pay, without assess23 ing an overdraft coverage fee or charge, an overdraft in24 curred by a consumer.’’. 


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1 SEC. 5. REGULATORY AUTHORITY OF THE BOARD. 

2 (a) IN GENERAL.—Not later than 9 months after the 

3 date of enactment of this Act (except as provided in sub4 section (b)), the Board of Governors of the Federal Re5 serve System (in this Act referred to as the ‘‘Board’’), in 

6 consultation with the Comptroller of the Currency, the 

7 Board of Directors of the Federal Deposit Insurance Cor8 poration, the Director of the Office of Thrift Supervision, 

9 and the National Credit Union Administration Board, 

10 shall issue such final rules and publish such model forms 

11 as necessary to carry out section 140B of the Truth in 

12 Lending Act, as added by this Act. 

13 (b) BOARD AUTHORITY REGARDING ADDITIONAL

14 WARNINGS.—The Board may, by rule, after taking into 

15 account the findings of the Comptroller General of the 

16 United States under section 6, require warnings at loca17 tions such as point-of-sale transfer terminals or other loca18 tions, that are similar to those required under section 

19 140B(i) of the Truth in Lending Act, as added by this 

20 Act, where feasible, and if the cost of providing such warn21 ings does not outweigh the benefit to consumers. 

22 SEC. 6. STUDY AND REPORT BY THE GAO. 

23 (a) STUDY.— 

24 (1) IN GENERAL.—The Comptroller General of 

25 the United States shall conduct a study regarding 

26 whether it is feasible for a depository institution— 


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1 (A) to provide a warning to a consumer at 

2 a point-of-sale transfer terminal that com3 pleting a transfer may trigger overdraft cov4 erage fees; and 

5 (B) to provide the consumer with the op6 portunity to cancel the point-of-sale transfer be7 fore the transaction is completed. 

8 (2) CONSIDERATIONS.—In conducting the study 

9 under this subsection, the Comptroller General shall 

10 evaluate— 

11 (A) the benefits to consumers of a point12 of-sale transfer overdraft warning and oppor13 tunity to cancel; 

14 (B) the availability of technology to pro15 vide such a warning and opportunity; and 

16 (C) the cost of providing such warning and 

17 opportunity. 

18 (b) REPORT TO CONGRESS.—Not later than 1 year 

19 after the date of enactment of this Act, the Comptroller 

20 General shall submit a report to Congress on the results 

21 of the study conducted under subsection (a). 

22 (c) DEFINITIONS.—As used in this section, the terms 

23 ‘‘overdraft coverage program’’, ‘‘overdraft coverage fee’’, 

24 and ‘‘depository institution’’ have the same meanings as 


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1 in section 103(cc) of the Truth in Lending Act, as added 

2 by this Act. 

3 SEC. 7. EFFECTIVE DATE. 

4 (a) IN GENERAL.—This Act and the amendments 

5 made by this Act shall become effective 1 year after the 

6 date of enactment of this Act, whether or not the rules 

7 of the Board under this Act or such amendments are 

8 issued in final form. 

9 (b) MORATORIUM ON FEE INCREASES.— 

10 (1) IN GENERAL.—During the 1-year period be11 ginning on the date of enactment of this Act, no de12 pository institution may increase the overdraft cov13 erage fees or charges assessed on transaction ac14 counts for paying a transaction (including a check or 

15 other debit) in connection with an overdraft or for 

16 non-sufficient funds. 

17 (2) DEFINITIONS.—As used in this section, the 

18 terms ‘‘depository institution’’, ‘‘overdraft’’, ‘‘over19 draft coverage fee’’, ‘‘transaction account’’ and 

20 ‘‘nonsufficient fund fee’’ have the same meanings as 

21 in section 103(cc) of the Truth in Lending Act, as 

22 added by this Act. 

Æ 


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