ABA urges Congress to reject bills restricting overdraft

In a statement submitted for the record ahead of a Senate Banking subcommittee hearing on overdraft Wednesday, the American Bankers Association emphasized the important role that overdraft protection plays as a source of liquidity for American consumers and urged lawmakers to reject any legislation that would restrict these offerings. Citing data from a recent ABA/Morning Consult survey, ABA highlighted that nine in 10 consumers find  their bank’s overdraft protection valuable, and well over half believe it is reasonable for banks to charge a fee for the service.

“Restrictions on overdraft may lead financial institutions to stop offering these services, which would result in significantly more returned checks and declined transactions,” ABA cautioned. “This, in turn, will mean that consumers will pay returned item fees charged by the payee or merchant and late fees, and may have lower credit ratings or be required to pay using cash, a cashier’s check or a money order.”

As lawmakers examine overdraft protection services, the association urged them to respect and protect consumer choice, noting that consumers who do not wish to have access to overdraft services have ample opportunities to open overdraft-free accounts, including Bank On-certified accounts, which are offered by institutions making up 56% of the U.S. deposit market. ABA also called for a robust CFPB study of overdraft usage that provides “an evidence-based understanding of regular users of overdraft protection,” and called on Congress reduce barriers that prevent banks from offering affordable small-dollar credit options.