Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Banking newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (March 23, 2020, 6:06 PM EDT) -- Two Democratic senators on Monday announced an effort to suspend overdraft fees for the duration of the COVID-19 emergency, requiring banks to skip the typically $35 charge when a purchase exceeds the funds in a consumer's checking account.
New Jersey Sen. Cory Booker joined Ohio Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, to introduce the measure on Sunday during a rare weekend legislative session.
The Stop Overdraft Profiteering Act would ban overdraft fees during a presidentially declared emergency or major disaster and for six months afterward. Banks, credit unions and other financial institutions would also be prohibited from telling credit reporting agencies about overdraft events during emergencies. President Donald Trump declared an emergency earlier this month for the COVID-19 pandemic.
Large banks make more than $11 billion a year in overdraft fees, according to Federal Deposit Insurance Corp. data cited by the Center for Responsible Lending.
"Millions of hardworking Americans have been thrown into financial insecurity because of this unprecedented global pandemic," Booker said in a statement. "For these individuals, and those vulnerable before the outbreak, one $35 overdraft charge can lead to financial free fall."
"At the height of this pandemic, hardworking Americans should be protecting their health, not worrying about big banks slapping them with fees for small overdraft amounts," Brown added.
Brown's office said the bill targets emergencies that are national in scope. Although presidents often declare major disasters in response to tornadoes, fires and other incidents that only impact a small region, the overdraft ban would only come into force when major disasters result in individual assistance under the Stafford Act.
The senators said they want their legislation included in the massive stimulus bill being negotiated in the Senate.
They have previously introduced standalone bills that would permanently limit the number and price of overdraft fees, stop overdraft fees on debit card transactions and ATM withdrawals, and prohibit sharing overdraft information with credit reporting agencies.
However, the measure has not advanced in the Republican-led Senate. Skeptics argued that such measures would discourage overdraft protection and push consumers toward high-interest payday lenders. The American Bankers Association declined to comment Monday but opposed previous iterations of the bill.
Some banks have already suspended overdraft fees during the pandemic. Ally Bank said it would skip the charges through at least July 16. Other institutions say they will consider waiving overdraft and other fees on a case-by-case basis when consumers call to ask for help.
Last week, federal banking regulators announced that, among other actions, dropping overdraft fees during the pandemic can earn banks credit toward their Community Reinvestment Act requirements.
--Additional reporting by Jon Hill. Editing by Nicole Bleier.
For a reprint of this article, please contact reprints@law360.com.
