Financial Regulatory Forum

US Fed must be tougher on harsh overdraft fees – Sen Schumer

By Reuters Staff
October 16, 2009

U.S. Senator Charles Schumer, July 12, 2009 (file photo) REUTERS/Chip East  WASHINGTON, Oct 16 (Reuters) – The Federal Reserve needs to take a tougher approach to cracking down on excessive bank overdraft fees, U.S. Senator Charles Schumer warned on Friday.

Saying that the central bank’s move to crack down on the fees doesn’t go far enough, Schumer, a Democrat, warned that Congress will act if the Fed fails to take a firmer line.

“The Fed is finally ready to act on this abusive practice, but so far, it doesn’t look like their reforms will go far enough to protect consumers,” Schumer, a senior Senate Banking Committee member, said in a statement.

“Making overdraft protection policies truly voluntary for customers would be a good first step, but even that is not enough. This practice needs to be totally reined in …

On Wednesday, Fed official Daniel Tarullo said at a Senate committee hearing that the regulator would issue a new, unspecified rule on overdraft fees “within the next month.”

Senate Banking Committee Chairman Christopher Dodd said on Sept. 18 that he was working on legislation that would “protect Americans from excessive checking account overdraft fees.”

Dodd’s bill would require that bank customers “opt-in” to overdraft protection programs and prohibit banks from charging consumers overdraft fees without their consent.

Schumer wrote a letter to Fed Chairman Ben Bernanke on the matter. Schumer said, “If the Fed doesn’t go far enough, Congress will go further. Banks should not be scratching and clawing their way back to profitability on the backs of their customers.”

(Reporting by Kevin Drawbaugh; Editing by Andrew Hay) ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax))) Keywords: FINANCIAL OVERDRAFT/SCHUMER

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