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July 23, 2013 – A bill announced Monday by Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, would require the CFPB to issue regulations regarding financial institutions' overdraft reordering practices.

Brown, in a press conference in Ohio, said banks "should play by the rules instead of purposefully ‘reordering' their customers' debit card transactions so that they profit while consumers rack up costly penalties." Brown said his bill would allow the CFPB "to crack down on banks that employ predatory practices" and to establish "fair guidelines to protect consumers and the banks and credit unions that play fair with their customers."

Brown's legislation, anticipated in Monday's NAFCU Today, responds to a recent study by the CFPB that looked at market and contextual factors in the offering of overdraft services since the 2010 implementation of a consumer opt-in requirement under Regulation E. His bill is aimed at:

• ensuring financial institutions post transactions in an objective way that is clear to consumers;
• giving the CFPB authority to monitor institutions' overdrafting practices to determine if they are acting in a predatory way; and
• establishing fair guidelines to protect consumers.

In a recent NAFCU Economic and CU Monitor report on overdraft protection programs, about 98 percent of credit union survey respondents said they charge overdraft fees, and the median amount charged was $25. However, 93.9 percent of respondents indicated that they will reverse those charges on a case-by-case basis. Moreover, 69.8 percent of respondents contact members who repeatedly incur overdraft charges.

Brown said his bill would provide a safety net for those financial institutions, including credit unions, that play by the rules when it comes to overdraft practices. NAFCU will continue to monitor this legislation.