Statement on Re-introduction of the Overdraft Protection Act

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Statement of Higher Ed Campaign Director Kaitlyn Vitez on the reintroduction of the Overdraft Protection Act, which would improve consumer disclosures and limit excessive fees.

U.S. PIRG is pleased to once again join Rep. Carolyn Maloney to support the Overdraft Protection Act  I work primarily on student consumer protection issues, and I really want to thank Rep. Maloney for her work on the Credit CARD Act. It banned predatory financial companies from using shady on-campus marketing tactics to steer students into credit card debt they could never repay. Sadly, these same aggressive marketing tactics are still used today by banks – just for high-fee debit cards.

The pre-CFPB financial regulators imposed a requirement in 2010 that banks could not enroll consumers in the most bank-friendly overdraft scheme, known as “standard overdraft protection,” unless they affirmatively opt-in. Much more needs to be done, since aggressive marketing by some banks has led to massive overdraft fees collected from some consumers, many of them younger, especially college students. College students like my friend Sebastian, who racked up $150 in overdraft fees his freshman year, when the bank on his campus took advantage of the fact that he was managing his own finances for the first time in his life. Quite frankly, he was taken advantage of. And he wasn’t alone.

U.S. PIRG’s most recent report, earlier this year, found that students at colleges with paid marketing agreements with banks paid the most in bank and overdraft fees. I’m sure you’ll all be shocked to hear that despite Wells Fargo only issuing a quarter of the campus debit cards nationally, their account holders racked up nearly half of total fees. 

Our previous overdraft fee report, in 2016, found that overdraft and non-sufficient fund (NSF) revenue per account is on the rise. Using CFPB data, we also found a positive correlation: the more a bank relied on overdraft revenue, the more consumer complaints to the CFPB.

The Overdraft Protection Act takes steps to rein in deceptive marketing of opt-in overdraft protection products and limits the number of overdrafts that can be charged per month and per year. It’s an important bill that will protect college students, other young people, and other persons of limited means from becoming cash cows for overdraft revenue. Thank you.

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