I’d like to thank my colleague on the Financial Services Committee, Congresswoman Carolyn Maloney, for organizing this press conference. She was a leader in passing the “Credit Card Accountability, Responsibility and Disclosure Act” -- otherwise known as the CARD ACT. I was proud to work with her on that legislation as an original co-sponsor.
Now we have turned our attention to areas not covered in that bill – debit cards, checking accounts and transfers. I will do everything I can, as Ranking Member of the Committee on Financial Services, to put all my efforts behind legislation to provide fairness to consumers who use these services.
The legislation we are talking about today is a common-sense bill which protects consumers from abusive practices by some financial institutions.
Debit cards are a convenience, and I don’t begrudge any company earning honest profits by providing a real service to their customers. But some financial institutions have rigged the game by unfairly charging consumers high overdraft fees.
This year, profits on overdraft fees are up – to $32 billion.
While some overdraft services provide a benefit to consumers, often times these services have fees and provisions in the fine print which do more harm than good.
As my colleague Congresswoman Maloney points out, many financial institutions have found a way to make a cup of coffee cost more than $30!
But it’s worse than that – this is part of a system to maximize profits. Some companies have even developed sophisticated software to do it by changing the order that transactions are charged to customers’ accounts.
What do they call this practice? Fee Harvesting.
For example, let’s say that a customer buys a cup of coffee for $2, then pays $3 at a parking meter, then a $1 for a newspaper, then $5 for a sandwich at a deli, and then finally buys $100 worth of groceries. If the financial institution were to debit these transactions in the order that they happened, it’s possible that only the last one – the groceries – would generate an overdraft fee.
But financial institutions know that it is far more lucrative to rearrange the chronology of purchases to make the most expensive charge first. If a $100 charge at the supermarket causes an overdraft, it generates a quick $30 profit. Then a $2 cup of coffee hits the customer for another $30. The $1 newspaper -- another $30. The $3 at the parking meter -- another $30. And the $5 sandwich slams the consumer for yet another $30.
Today, we introduce a bill which will prevent these unscrupulous practices. I am proud to be an original co-sponsor of this legislation. I know that well over 100 of my Democratic colleagues have signed onto the bill.
This should be a bipartisan effort because protecting consumers is something that every Member of Congress should embrace.
I ask all my colleagues to join us in strong support of this bill.