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Dodd introduces Overdraft Bill; (PS: You’re gonna love this one)

Dodd Introduces Overdraft Bill; (PS: You're Gonna' Love This One)

In the rush to do “something” to shore up his falling poll numbers, Senate Banking Committee Chairman has introduced a bill to “protect customers from abusive checking account overdraft fees.” The bill is co-sponsored by the usual suspects: Chuck Schumer (D-N.Y.), Jack Reed (D-R.I.), Sherrod Brown (D-Ohip) and Jeff Merkley (D-Ore).

“At a time when many can afford it least, American consumers are being hit with hundreds of dollars in penalties for overdrawing their account by just a few dollars,” Dodd said. “Banks should not be trying to bolster their profits at the expense of their customers.”

“Stealth” overdraft fees allow banks to “reach in and take money out of the wallets of hardworking Americans,” said Merkley. “These fees are not transparent, they're not fair, and they need to end.”

“Taxpayers helped stabilize the financial services industry – big banks should not return the favor by slamming consumers with billions of dollars in overdraft fees,” said Brown.

Senator Reed also chimed in:

“Overdraft charges on debit cards are often deceptive because most people never asked for overdraft protection and logically assume they can only spend the money they have,” Reed said. “(This act gives) consumers more choices and (prohibits) banks from levying excessive, hidden fees on individuals and families who are struggling to keep their homes and jobs.”

Then Senator Schumer added his two-cent's worth:

“Overdraft protection is billed as a customer service, but it is actually anything but,” Schumer pronounced. “The bottom line is, debit cardholders are getting scammed by their banks. Families across the country are being involuntarily placed in these overdraft loan programs and getting ripped off by excessive fees. It's time to stop this practice dead in its tracks.” (emphasis added).


After all of that inflamed anti-bank rhetoric, what does the bill actually do? 
        1. For one thing, it limits the overdraft fees your bank can charge any one customer to six (6) per year, and one (1) per month. Note that it does not limit the number of times a customer can overdraw the account – just the number of times you can charge a fee for it, apparently even if you don't cover the check.
         2. Whatever fee you charge must be “proportional” to the cost of processing the overdraft.

Note: Apparently they don't understand that there are at least two costs involved whenever a check “bounces” and is honored: one is for processing the item itself, and the other is for advancing the funds to cover the check. Other fees are also out there, and will be charged by the merchant (Wal-Mart, Quick-Trip, 7-11).

In addition, in some states – like Oklahoma – writing a check “with the intent to cheat and defraud” a person, firm or entity and “obtain . . . money, property or valuable thing” is a crime: a misdemeanor if the check is less than $500, and a felony if it exceeds that amount.

         3. You will no longer be able to “manipulate” the order in which transactions are posted to the account, you awful person you.
         4. You must get your customer's consent (opt in) at the outset before you are permitted to enroll them in any program for ATM and debit card transactions (but apparently not checking accounts? It's not at all clear at this point, and we haven't seen the actual language).
         5. You'll be required to notify your customer when the account is about to be overdrawn, by e-mail, text message or “snail mail.” [We're not quite sure how this is supposed to work in 'real time' but apparently they are certain this is needed.]
         6. You'll have to notify your customer if an ATM or branch teller transaction will overdraw his or her account and give your customer a chance to cancel the transaction.

Mr. Frank (Representative Barney Frank [D-MA], Chairman of the House Financial Services Committee) tells us that we're going to get overdraft protection legislation, one way or the other. Either it's going to be through the proposed new Consumer Financial Protection Agency (CFPA) or it will come through a bill like this one or the one that's been introduced in the House and which is actually even worse if you can imagine.
Are we feeling good yet?

In case you want to get in touch with Senator Dodd, here's his address:

Christopher J. Dodd, United States Senator
448 Russell Office Building
Washington, D. C. 20510

CFPA Proposal Approved by Financial Services Committee

Speaking of Mr. Frank and bad news, this morning the House Financial Services Committee approved creation of the Consumer Financial Protection Agency – H.R. 3126 as amended – on a vote of 39 – 29. Oklahoma Congressman Frank Lucas voted “NO”.
esterday the House Financial Services Committee approved, by voice vote, a preemption amendment that takes the law back to the Supreme Court's decision in the Barnett case and at least addresses the subject of preemption in this manner rather than simply eliminating it. We continue to have major concerns about the amendment. The Committee rejected, by a vote of 27-40, an alternative amendment by Rep. Jeb Henserling (R-TX) that would have maintained the current standard on preemption for national banks and federal savings associations.

The measure will now go to the House floor where quick action on the creation of this horrendous new consumer agency is expected. Stay tuned for updates and check the OBA website for the latest developments.

President Obama Plans to Provide TARP Loans to Community Banks

Yesterday President Obama announced that banks with less than $1Billion in assets are now eligible to apply for Troubled Asset Relief Program loans at a reduced rate.

"Under the new steps we're announcing today, if these institutions put forth a plan to increase lending to small businesses, we will help them get the capital they need to do it at rates that are more affordable than the ones offered to our largest financial institutions," the President said in making his announcement. Since March, banks with less than $1 Billion in assets could apply for TARP loans with a 5 percent dividend, as long as their federal regulators approved. Now, those same banks are eligible for loans a just a 3 percent rate.

As we understand it, once a bank has been granted regulatory approval and files an application, it takes about 90 days to receive the capital investment.

The president also called on Congress to increase Small Business Administration loan guarantees to encourage community banks to grant more loans. He wants to see so-called SBA 7a loan guarantees increased to $5 Million from $2 Million; and standard 504 loans (for purchasing land and equipment) grow to $5 Million from $2 Million.


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