Stop Overdraft Profiteering Act of 2021
Bill: S.2677 | Sponsor: Sen. Booker, Cory A. (D-NJ)
Policy area: Finance and Financial Sector

Summary:
Stop Overdraft Profiteering Act of 2021
This bill prohibits a depository institution from engaging in certain acts in connection with overdraft coverage.
Each depository institution that offers overdraft coverage for accounts must disclose overdraft coverage fees and certain related information. A depository institution must provide certain other disclosures regarding its overdraft protection program, including prompt notification of the account's overdraft status.
Regarding overdraft fees, the bill
The bill also prohibits a depository institution from

To amend the Truth in Lending Act to limit overdraft fees and establish 
 fair and transparent practices related to the marketing and provision 
  of overdraft coverage programs at depository institutions, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Stop Overdraft Profiteering Act of 
2021''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds the following:
            (1) Overdraft coverage is a form of short-term credit that 
        depository institutions market for consumer transaction 
        accounts. Historically, depository institutions covered 
        overdrafts for a fee on an ad hoc basis.
            (2) With the growth in specially designed software programs 
        and in consumer use of debit cards, overdraft coverage for a 
        fee has become more prevalent.
            (3) Many depository institutions market a range of 
        overdraft options but aggressively encourage consumers to 
        consent to the most expensive option, where a high flat fee is 
        collected for every individual overdraft transaction.
            (4) Many depository institutions collect a high flat fee, 
        including for small dollar transactions, each time the 
        institution covers an overdraft, impose multiple overdraft 
        coverage fees within a single day, and charge additional fees 
        for each day during which the account remains overdrawn.
            (5) Such abusive practices in connection with overdraft 
        coverage fees have deprived consumers of meaningful options and 
        placed significant financial burdens on low- and moderate-
        income consumers.
    (b) Purpose.--It is the purpose of this Act to protect consumers by 
limiting abusive overdraft coverage fees and practices and by providing 
meaningful disclosures and consumer choice in connection with overdraft 
coverage fees.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) CFPB.--The term ``CFPB'' means the Bureau of Consumer 
        Financial Protection.
            (2) Depository institution; overdraft; overdraft coverage 
        fee; transaction account; nonsufficient fund fee.--The terms 
        ``depository institution'', ``overdraft'', ``overdraft coverage 
        fee'', ``transaction account'', and ``nonsufficient fund fee'' 
        have the meanings given the terms in 140B(p) of the Truth in 
        Lending Act, as added by section 4 of this Act.

SEC. 4. FAIR MARKETING AND PROVISION OF OVERDRAFT COVERAGE PROGRAMS.

    (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:
``Sec. 140B. Overdraft coverage program disclosures and consumer 
              protection
    ``(a) Prohibitions.--No depository institution may engage in acts 
or practices in connection with the marketing of or the provision of 
overdraft coverage that are designed to evade the provisions of this 
section.
    ``(b) Marketing Disclosures.--Each depository institution that 
provides or offers to provide overdraft coverage with respect to 
transaction accounts held at that depository institution shall clearly 
and conspicuously disclose in all marketing materials for such 
overdraft coverage any overdraft coverage fees with respect to such 
overdraft coverage.
    ``(c) Overdraft Coverage Fees.--
            ``(1) In general.--Except as provided in paragraph (2), no 
        depository institution may charge an overdraft coverage fee for 
        any transaction--
                    ``(A) at an automated teller machine; or
                    ``(B) involving a one-time debit card transaction.
            ``(2) Overdraft fees permitted for checks and automatic 
        recurring payments.--A depository institution may charge an 
        overdraft coverage fee for a check or an automatic recurring 
        payment as part of an overdraft coverage program that 
        incorporates the requirements identified in subsections (d) 
        through (l).
    ``(d) Consumer Consent Opt-In.--A depository institution may charge 
overdraft coverage fees with respect to the use of checks or automatic 
recurring payments only if--
            ``(1) the depository institution has waited at least 3 days 
        after opening an account to offer the overdraft coverage 
        program; and
            ``(2) the consumer has consented in writing, in electronic 
        form, or in such other form as is permitted under regulations 
        of the Bureau.
    ``(e) Consumer Disclosures.--Each depository institution shall 
clearly disclose to each consumer covered by an overdraft protection 
program of that depository institution--
            ``(1) that the consumer may be charged for not more than 1 
        overdraft coverage fee in any single calendar month and not 
        more than 6 overdraft coverage fees in any single calendar 
        year, per transaction account;
            ``(2) information about any alternative overdraft products 
        that are available (such as linked accounts, lines of credit, 
        and alerts), including a clear explanation of how the terms and 
        fees for such alternative services and products differ; and
            ``(3) such other information as the Bureau may require, by 
        rule.
    ``(f) Periodic Statements.--Each depository institution that offers 
an overdraft coverage program shall, in each periodic statement for any 
transaction account that has an overdraft coverage program feature, 
clearly disclose to the consumer the dollar amount of all overdraft 
coverage fees and nonsufficient fund fees charged to the consumer for 
the relevant period and year to date.
    ``(g) Exclusion From Account Balance Information.--No depository 
institution may include the amount available under the overdraft 
coverage program of a consumer as part of the transaction account 
balance of that consumer and the transaction account balance shall be 
more prominently displayed than any amount available under the 
overdraft coverage program.
    ``(h) Prompt Notification.--Each depository institution shall 
promptly notify consumers, through a reasonable means selected by the 
consumer, when overdraft coverage has been accessed with respect to the 
account of the consumer, not later than on the day on which such access 
occurs, including--
            ``(1) the date of the transaction;
            ``(2) the type of transaction;
            ``(3) the overdraft amount;
            ``(4) the overdraft coverage fee;
            ``(5) the amount necessary to return the account to a 
        positive balance;
            ``(6) whether the participation of a consumer in an 
        overdraft coverage program will be terminated if the account is 
        not returned to a positive balance within a given time period; 
        and
            ``(7) information about any alternative overdraft products 
        as described in this section.
    ``(i) Terminated or Suspended Coverage.--Each depository 
institution shall provide prompt notice to the consumer, using a 
reasonable means selected by the consumer, if the institution 
terminates or suspends access to an overdraft coverage program with 
respect to an account of the consumer, including a clear rationale for 
the action.
    ``(j) Overdraft Coverage Restrictions and Fee Limits for Checks and 
Automatic Recurring Payments.--
            ``(1) Frequency.--A depository institution may charge not 
        more than 1 overdraft coverage fee in any single calendar 
        month, and not more than 6 overdraft coverage fees in any 
        single calendar year, per transaction account.
            ``(2) Reasonable and proportional overdraft coverage 
        fees.--
                    ``(A) In general.--The amount of any overdraft 
                coverage fee shall be reasonable and proportional to 
                the cost to the financial institution in providing the 
                overdraft coverage for that transaction, including the 
                cost to the financial institution of funds and other 
                costs directly associated with the transaction.
                    ``(B) Safe harbor rule authorized.--The Bureau, in 
                consultation with the Board of Governors of the Federal 
                Reserve System, the Comptroller of the Currency, the 
                Board of Directors of the Federal Deposit Insurance 
                Corporation, and the National Credit Union 
                Administration Board, may issue rules to provide an 
                amount for any overdraft coverage fee that is presumed 
                to be reasonable and proportional to the costs to the 
                financial institution in providing the overdraft 
                coverage for the transaction.
            ``(3) Posting order.--Each depository institution shall 
        post transactions with respect to transaction accounts in such 
        a manner that minimizes overdraft coverage fees and 
        nonsufficient fund fees.
    ``(k) Debit Holds.--No depository institution may charge an 
overdraft coverage fee on any category of transaction, if the overdraft 
results solely from a debit hold amount placed on a transaction account 
that exceeds the actual dollar amount of the transaction.
    ``(l) Nondiscrimination for Not Opting In.--In implementing the 
requirements of this section, each depository institution shall provide 
to consumers who have not consented to participate in an overdraft 
coverage program transaction accounts having the same terms, 
conditions, or other features as those that are provided to consumers 
who have consented to participate in such overdraft coverage program, 
except for features of such overdraft coverage.
    ``(m) Nonsufficient Fund Fee Limits.--
            ``(1) In general.--No depository institution may charge any 
        nonsufficient fund fee with respect to--
                    ``(A) any transaction at an automated teller 
                machine; or
                    ``(B) any debit card transaction.
            ``(2) Reasonable and proportional.--Reasonable and 
        proportional nonsufficient fund fees.
                    ``(A) In general.--The amount of any nonsufficient 
                fund fee shall be reasonable and proportional to the 
                cost to the financial institution directly associated 
                with returning the transaction.
                    ``(B) Safe harbor rule authorized.--The Bureau, in 
                consultation with the Board of Governors of the Federal 
                Reserve System, the Comptroller of the Currency, the 
                Board of Directors of the Federal Deposit Insurance 
                Corporation, and the National Credit Union 
                Administration Board, may issue rules to provide an 
                amount for any non-sufficient fund fee that is presumed 
                to be reasonable and proportional to the costs to the 
                financial institution of returning the transaction.
    ``(n) Reports to Consumer Reporting Agencies.--
            ``(1) In general.--No depository institution may report 
        negative information regarding the use of overdraft coverage by 
        a consumer to any consumer reporting agency, as defined in 
        section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a), 
        when the amounts of the overdraft are repaid under the terms of 
        an overdraft coverage program.
            ``(2) Deletion.--A depository institution shall request 
        that the consumer reporting agency described in paragraph (1) 
        delete any previously reported negative information, including 
        closure of an account due to unpaid overdrafts, if the consumer 
        repays the overdrafts or tenders payment for the overdrafts to 
        the depository institution or its successor.
    ``(o) Rule of Construction.--No provision of this section may be 
construed as prohibiting a depository institution from retaining the 
discretion to pay, without assessing an overdraft coverage fee or 
charge, an overdraft incurred by a consumer.
    ``(p) Definitions Relating to Overdraft Coverage.--For purposes of 
this section:
            ``(1) Check.--The term `check'--
                    ``(A) has the meaning given the term in section 3 
                of the Check Clearing for the 21st Century Act (12 
                U.S.C. 5002); and
                    ``(B) does not include a traveler's check.
            ``(2) Depository institution.--The term `depository 
        institution' means any entity described in clauses (i) through 
        (vi) of section 19(b)(1)(A) of the Federal Reserve Act (12 
        U.S.C. 461(b)(1)(A)).
            ``(3) Nonsufficient fund fee.--The term `nonsufficient fund 
        fee' means a fee or charge assessed in connection with an 
        overdraft for which a depository institution declines payment.
            ``(4) Overdraft.--The term `overdraft' means, in a 
        withdrawal by check or other debit from a consumer transaction 
        account in which there are insufficient or unavailable funds in 
        the account to cover such check or debit, the amount of such 
        withdrawal that exceeds the available funds in the account.
            ``(5) Overdraft coverage.--The term `overdraft coverage' 
        means the payment of a check presented or other debit posted 
        against a consumer transaction account by the depository 
        institution in which such account is held, even though there 
        are insufficient or unavailable funds in the account to cover 
        such checks or other debits.
            ``(6) Overdraft coverage fee.--The term `overdraft coverage 
        fee'--
                    ``(A) means any fee or charge assessed in 
                connection with overdraft coverage, or in connection 
                with any negative account balance that results from 
                overdraft coverage; and
                    ``(B) does not include--
                            ``(i) a periodic rate in connection with an 
                        extension of credit through an overdraft line 
                        of credit program; and
                            ``(ii) a fee or charge imposed in 
                        connection with any transfer from an account 
                        linked to another transaction account.
            ``(7) Overdraft coverage program.--The term `overdraft 
        coverage program' means a service under which a depository 
        institution assesses an overdraft coverage fee for overdraft 
        coverage.
            ``(8) Transaction account.--The term `transaction account' 
        has the meaning given the term in section 19(b)(1) of the 
        Federal Reserve Act (12 U.S.C. 461(b)(1)).''.
    (b) Technical Amendment.--The table of contents for chapter 2 of 
the Truth in Lending Act is amended by inserting after the item 
relating to section 140A the following:

``140B. Overdraft coverage program disclosures and consumer 
                            protection.''.

SEC. 5. REGULATORY AUTHORITY OF THE CFPB.

    Not later than 2 years after the date of the enactment of this Act, 
the CFPB shall issue such final rules and publish such model forms as 
necessary to carry out section 140B of the Truth in Lending Act, as 
added by section 4 of this Act.

SEC. 6. EFFECTIVE DATE.

    (a) In General.--This Act and the amendments made by this Act shall 
take effect 1 year after the date of the enactment of this Act, whether 
or not the rules of the CFPB under this Act or such amendments are 
prescribed in final form.
    (b) Moratorium on Fee Increases.--During the 1-year period 
beginning on the date of the enactment of this Act, no depository 
institution may increase the overdraft coverage fees or charges 
assessed on transaction accounts for paying a transaction (including a 
check or other debit) in connection with an overdraft or for 
nonsufficient funds.
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