The Key Issues in the Debate on Overdraft Protection

On Friday, October 30, 11 representatives from the financial industry testified before the House Committee on Financial Services about the Overdraft Protection Act of 2009 “to amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions, and for other purposes.” Read the full text of H.R. 3904 Among those called upon to testify was Jim Blaine, CEO of State Employees Credit Union (of North Carolina). In this short clip below, Blaine builds on his written testimony and outlines what he identifies as the key issues at the core of the overdraft debate. Blaine, the Congressional panel, and the other financial industry representatives discussed a series of topics, which credit unions must address now at both an institutional and regulatory level.

• Should overdraft protection be opt-in, opt-out, mandatory, or banned?
• What is the cost to the financial institution to process an overdraft payment?
• What determines how much financial institutions should charge for overdraft payments?
• Should financial institutions process payment requests from largest to smallest payments, smallest to largest, or in the order in which the payment requests are received?
• Should there be a cap on the number of overdraft fees a financial institution can levy per month?
• Should overdraft protection be treated as a loan or a fee/penalty?

See the full committee hearing webcast and read the other prepared testimonies. We will be posting additional video content from this committee hearing to address these questions. In the meantime, please comment here or post your thoughts on our discussion board to continue the dialogue on a bill that, if passed, will have serious implications for the financial industry.