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ICBA: New Overdraft Legislation Would Restrict Services

Nation’s Main Street Community Bankers Back Consumer Education, Choice

Washington, D.C. (October 22, 2009)—The Independent Community Bankers of America (ICBA) is extremely disappointed that the Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act of 2009 (S. 1799) will adversely affect the ability of community banks to offer fair overdraft coverage, both through discretionary (case-by-case basis) and automated programs, which benefit consumers.

“ICBA supports clear and simple disclosures for the overdraft protection programs valued and appreciated by community bank customers nationwide,” said Karen Thomas, ICBA executive vice president and director of government relations. “Efforts to tighten rules on the minority of financial institutions with abusive overdraft protection programs will severely hamper the ability of community banks to offer the products and services their customers need. Community banks want the ability to continue to offer personalized service and the freedom to cover overdrafts according to the needs of each customer.”

The legislation introduced by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and seven other Senators would require new consumer disclosures; allow fees for overdrafts originating from ATM withdrawals or debit card transactions only with the consumer’s consent; limit the number of overdraft fees to one per month and six per year; prohibit non-sufficient fund (NSF) fees for ATM withdrawals and debit card transactions; and expand consumer notification regarding transactions that create overdrafts.

Community banks offer a variety of overdraft services to their customers. According to ICBA’s 2009 Community Bank Payments Survey, released last month: 66 percent analyze overdrafts manually on a case-by-case basis, 53 percent offer overdraft credit lines, 28 percent of respondents offer automated overdraft protection, and 87 percent offer automatic account transfer services. Many survey respondents also said they enroll consumers in multiple overdraft products. With regard to automated overdraft protection, 64 percent of the respondents provide consumers the ability to opt-out, 83 percent have a pre-established period before activation and 92 percent monitor consumer usage.

“Consistent with community banks’ proven commitment of acting in the best interests of their customers, many waive overdraft fees for a variety of circumstances,” said Thomas.

ICBA looks forward to working with the Senate to develop legislation that clearly addresses abusive overdraft protection programs and yet allows community banks to continue offering a variety of overdraft services that benefit the customers they proudly serve within their community.