September 10, 2009
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News: Debit Card Protections
Now that credit card companies will need to comply with new regulation that will limit their ability to increase earnings, they have found a new avenue in victimizing Americans. Banks have begun attacking checking account and debit card customers. Some lawmakers have taken notice and are moving quickly to stop escalating abuse by banks. Representative Carolyn Maloney (D-NY) is focusing on the introduction of new legislation that will give debit card customers the same protections that credit card customers have received. In a press release, Maloney announced her intentions to draft a new law that would require banks to alert debit and credit card customers at the point of sale or ATM when the transaction will cause an over-draft. The debit card customer will then have the option to accept or reject the transaction.
Opponents for the proposed legislation say it could have a devastating effect on banks and debit and credit card customers that do not typically go over their limits or over-draft. Just as credit card companies gain most of their profits from fees and penalties, nearly half of existing banks and credit unions collect most of their earnings from over-draft fees. Consequently, experts say the bill could lead to the failure of nearly 1,000 banks and 2,000 credit unions. According to a New York Times article, financial institutions will need to replace the over-draft fees with some other form of income. The question is; will they be able to respond fast enough to prevent failure?
Representative Maloney played an intricate role in the passing of the Credit Cardholder's Bill of Rights. Her draft of standards set the foundation for the final bill that was signed into law by President Barack Obama in May. The initial bill was introduced in 2008 and passed through the House of Representatives in September 2008; however, it did not meet the deadline of the 110th Congress. Together with Chairman Barney Frank and the Chairman of the Financial Institutions and Consumer Credit Subcommittee, Luis Gutierrez, Representative Maloney reintroduced the bill in 2009. With her support and track record, banks and credit unions might want to consider bringing ideas to the table that would replace over-draft fees.