Overdraft Loans

The banking industry is making forays into the high-cost lending market with “bounce protection” plans, a new form of high-cost credit that boosts fee income for banks. Using aggressive marketing techniques, banks are encouraging their low- and moderate-income customers to use bounce loans as a source of credit. Rather than denying a withdrawal, banks permit customers to overdraw at the ATM or through debit card transactions without informing them about the overdraft or accompanying fees.

Policy Analysis

Policy Briefs, Reports & Press Releases

• Statement re: CFPB report on overdraft loans, June 11, 2013
• Issue brief: Common Sense from the Common Law: Limiting Overdraft Fees to a "Reasonable and Proportional" Standard, April 2013

  White Paper: Restoring the Wisdom of the Common Law: Applying the Historical Rule Against Contractual Penalty Damages to Bank Overdraft Fees, April 2013

• Press release: Urban Trust Bank Halts Overdraft Fees on Payday Lender Prepaid Cards, Feb. 1, 2013
• Issue Brief: 300% Bank Payday Loans Spreading, August 2011 Group Comments to the Federal Banking Regulator (OCC) Opposing High Overdraft Fees and 300% Interest Bank Payday Loans, August 8, 2011
• Issue Brief: Features of a Safe Basic Banking or Prepaid Card Account, December 2010
• Press Release: Jury’s Out on Regulators’ New Proposal to Address Abusive Overdraft Loans, December 22, 2008
• Press Release: Regulators’ Overdraft Proposal Falls Short: Fails to Protect Consumers from Unwanted Credit, May 2008

Letters

• Letter to NCUA on Overdraft Loans, Nov. 30, 2010
• Consumer Groups' Letter to OCC on Overdraft Abuses, Oct. 2010
• Letters in support of  H.R. 3904, the Overdraft Protection Act of 2009 and S. 1799, the Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act of 2009, October 2009

Comments

• Consumer Group Comments to CFPB on Overdraft Programs, June 29, 2012
• Comment on Office of Thrift Supervision's Proposed Supplemental Guidance on Overdraft Loan Programs, June 2010
• Comments on FDIC's proposed Supervisory Guidance on Overdrafts, Sept. 2010
• Comments to FRB on proposals to amend Regulation E and DD provisions re overdraft programs, March 2010
• Comments to the Federal Reserve regarding Regulation Overdraft Loans under Regulation E, March 2009
• Comments of NCLC and others regarding Proposed Rulemaking to Prohibit Unfair or Deceptive Acts or Practices with Respect to Credit Cards and Overdraft Loans, August 2008

Testimony

• Testimony  before the U.S. House Committee on Financial Services Subcommittee on Financial Institutions and Consumer Credit regarding Overdraft Protection: Fair Practices for Consumers, July 2007

Additional Resources

• Bounce Protection: How Banks Turn Rubber into Gold by Enticing Consumers to Write Bad Checks - An Examination of Bounce Protection Plans