Title: Overdraft Protection Act of 2019
Policy area: Finance and Financial Sector

Summary:
Overdraft Protection Act of 2019
This bill prohibits a depository institution from engaging in unfair or deceptive acts in connection with overdraft coverage.
Each depository institution that offers overdraft coverage for accounts must disclose overdraft coverage fees. It must also disclose that
A depository institution must provide certain other disclosures regarding its overdraft protection program, including prompt notification of the account's overdraft status.
The bill limits the number of overdraft fees a consumer may be charged each month and year, and provides that such fees must be reasonable.
The bill prohibits an overdraft coverage fee if the overdraft results solely from a debit hold amount that exceeds the actual dollar amount of the transaction.
The bill also prohibits a depository institution from

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4254 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 4254

  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 HOUSE OF REPRESENTATIVES

                           September 9, 2019

   Mrs. Carolyn B. Maloney of New York (for herself, Mr. Foster, Mr. 
Sherman, Mr. Garcia of Illinois, Mr. Cicilline, Mr. Payne, Ms. Norton, 
  Mr. Johnson of Georgia, Mr. McGovern, Mr. Grijalva, Mr. Cohen, Ms. 
  Gabbard, Ms. Moore, Mr. Malinowski, and Mr. Raskin) introduced the 
   following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 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.

    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 ``Overdraft Protection Act of 2019''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds the following:
            (1) Overdraft coverage is a form of short-term credit that 
        depository institutions provide 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 offer 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) Most depository institutions collect a high flat fee, 
        including for small dollar transactions, each time the 
        institution covers an overdraft, in some cases impose multiple 
        overdraft coverage fees within a single day, and many 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 choices 
        about their accounts 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.

    (a) Additional Definitions.--Section 140B of the Truth in Lending 
Act, as added by section 4, is amended by adding at the end the 
following new subsection:
    ``(o) Definitions Relating to Overdraft Coverage.--For purposes of 
this section:
            ``(1) Check.--The term `check' has the same meaning as in 
        section 3(6) of the Check Clearing for the 21st Century Act (12 
        U.S.C. 5001 et seq.), other than a travelers check.
            ``(2) Depository institution.--The term `depository 
        institution' has the same meaning as 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' means any fee or charge assessed in connection with 
        overdraft coverage, or in connection with any negative account 
        balance that results from overdraft coverage, unless such fee 
        or charge is imposed in connection with--
                    ``(A) 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 
                Overdraft Protection Act of 2019; or
                    ``(B) any transfer from an account linked to 
                another transaction account.
        Such fee shall be considered a `finance charge' for purposes of 
        section 106(a), but shall not be included in the calculation of 
        the rate of interest for purposes of section 107(5)(A)(vi) of 
        the Federal Credit Union Act (12 U.S.C. 1757(5)(A)(vi)).
            ``(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 same meaning as in section 19(b)(1)(C) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(C)).''.
    (b) Conforming Amendment.--Section 107(5)(A)(vi) of the Federal 
Credit Union Act (12 U.S.C. 1757(5)(A)(vi)) is amended by inserting ``, 
other than an overdraft coverage fee, as defined in section 140B(o) of 
the Truth in Lending Act'' after ``inclusive of all finance charges''.

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 new 
section:
``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 unfair, deceptive, or 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--
            ``(1) any overdraft coverage fees with respect to such 
        overdraft coverage; and
            ``(2) that by not opting in to such overdraft coverage--
                    ``(A) a consumer's transaction may be declined if 
                there are insufficient funds in the related transaction 
                account; and
                    ``(B) the consumer will not be charged a fee if 
                such transaction is declined.
    ``(c) Consumer Consent Opt-In.--A depository institution may charge 
overdraft coverage fees with respect to the use of an automatic teller 
machine or point of sale transaction only if the consumer has consented 
in writing, in electronic form, or in such other form as is permitted 
under regulations of the Bureau.
    ``(d) Consumer Disclosures.--Each depository institution shall 
clearly disclose to each consumer covered by an overdraft coverage 
program of that depository institution--
            ``(1) that--
                    ``(A) the consumer may be charged for not more than 
                one overdraft coverage fee in any single calendar month 
                and not more than 6 overdraft coverage fees in any 
                single calendar year, per transaction account; and
                    ``(B) the depository institution retains the 
                discretion to pay (without assessing an overdraft 
                coverage fee) or reject overdrafts incurred by the 
                consumer beyond the numbers described in subparagraph 
                (A);
            ``(2) the overdraft coverage fee as an annual percentage 
        rate, so as to permit consumers to meaningfully compare the 
        overdraft coverage to alternative forms of overdraft options 
        and other sources of credit;
            ``(3) 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
            ``(4) such other information as the Bureau may require, by 
        rule.
    ``(e) 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.
    ``(f) 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.
    ``(g) 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; and
            ``(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.
    ``(h) 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.
    ``(i) Overdraft Coverage Fee Limits.--
            ``(1) Notice and opportunity to cancel.--Each depository 
        institution shall--
                    ``(A) warn any consumer covered by an overdraft 
                coverage program who engages in a transaction through 
                an automated teller machine or a branch teller if 
                completing the transaction would trigger overdraft 
                coverage fees, including the amount of the fees; and
                    ``(B) provide to the consumer the opportunity to 
                cancel the transaction before it is completed.
            ``(2) Frequency.--A depository institution may charge not 
        more than one overdraft coverage fee in any single calendar 
        month, and not more than 6 overdraft coverage fees in any 
        single calendar year, per transaction account.
            ``(3) Reasonable and proportional overdraft coverage 
        fees.--
                    ``(A) In general.--The amount of any overdraft 
                coverage fee that a depository institution may assess 
                for paying a transaction (including a check or other 
                debit) shall be reasonable and proportional to the 
                amount of the overdraft.
                    ``(B) Safe harbor rule authorized.--The Bureau, in 
                consultation with the Board of Governors of the Federal 
                Reserve System, 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 amount of the 
                overdraft.
            ``(4) Posting order.--In order to minimize overdraft 
        coverage fees charged to consumers, each depository institution 
        shall post transactions with respect to transaction accounts in 
        such a manner that the consumer does not incur avoidable 
        overdraft coverage fees.
    ``(j) 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.
    ``(k) 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.
    ``(l) Nonsufficient Fund Fee Limits.--No depository institution may 
charge any nonsufficient fund fee with respect to--
            ``(1) any transaction at an automated teller machine; or
            ``(2) any debit card transaction.
    ``(m) Reports to Consumer Reporting Agencies.--No depository 
institution may report negative information regarding the use of 
overdraft coverage by a consumer to any consumer reporting agency (as 
that term is defined in section 603 of the Fair Credit Reporting Act 
(15 U.S.C. 1681a)) when the overdraft amounts and overdraft coverage 
fees are repaid under the terms of an overdraft coverage program.
    ``(n) 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.''.
    (b) Technical Amendment.--The table of contents for chapter II of 
the Truth in Lending Act is amended by inserting after the item 
relating to section 140A the following new item:

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

SEC. 5. REGULATORY AUTHORITY OF THE BUREAU.

    Not later than 24 months after the date of the enactment of this 
Act, the Bureau of Consumer Financial Protection (hereafter in this Act 
referred to as the ``Bureau'') 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 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 Bureau under this Act or such amendments are 
prescribed in final form.
    (b) Moratorium on Fee Increases.--
            (1) In general.--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.
            (2) Definitions.--As used in this section, the terms 
        ``depository institution'', ``overdraft'', ``overdraft coverage 
        fee'', ``transaction account'' and ``nonsufficient fund fee'' 
        have the same meanings as in section 140B(o) of the Truth in 
        Lending Act, as added by this Act.
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