Sec. 2. Findings and purpose
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The Congress finds the following: Overdraft coverage is a form of short-term credit that financial institutions market for consumer accounts. Historically, financial institutions covered overdrafts for a fee on an ad hoc basis. With the growth in specially designed software programs and in consumer use of debit cards, overdraft coverage for a fee has become more prevalent. Many financial institutions market a range of overdraft options but aggressively encourage consumers to consent to the most expensive option, where a high flat fee is collected for every individual overdraft transaction.
Many financial institutions collect a high flat fee, including for small dollar transactions, each time the institution covers an overdraft, impose multiple overdraft coverage fees within a single day, and charge additional fees for each day during which the account remains overdrawn. Such abusive practices in connection with overdraft coverage fees have deprived consumers of meaningful options and placed significant financial burdens on low- and moderate-income consumers. African Americans and Latinos are disproportionately harmed by overdraft coverage fees and more likely to pay multiple overdraft coverage fees annually.
It is the purpose of this Act to protect consumers by limiting abusive overdraft coverage fees and practices, and by providing meaningful disclosures and consumer choice in connection with overdraft coverage fees.