Congress is considering several bills right now that would protect consumers against hefty overdraft charges.
Obviously, banks have a stake in such legislation.
Almost anybody with a checking account has done it at one time or another - written a check that was returned for insufficient funds. Banks offer what is called overdraft protection for a price and sometimes, that cost is hefty and hidden. The overdraft protection legislation would change that.
"The idea is to help protect consumers so that they don't pay a lot of fees for overdraft protection. And despite the good intentions of the legislation, right now there's still some flaws with it," said Andrew Rosen, Central Pacific Bank Vice President.
Still, the pressure is on from consumers. Senator Chris Dodd has introduced legislation requiring banks to get permission from customers rather than allowing overdrafts automatically. Overdraft fees earn banks 38.5 billion dollars a year. Overdraft protection is an alternative, but can also be costly.
"At Central Pacific Bank, we've always given customers the ability to opt out of overdraft programs and overdraft protection and in addition we're looking at some other ways to come up with more customer-friendly ways of protecting customers," said Rosen.
Banks argue that the overdraft protection program amounts to a short-term loan - the bank covers the check until the consumer can get money back into the account. For that, the argument goes, the bank should be able to charge a fee. Each consumer is different, Rosen says, and some may be willing to pay for overdraft protection.
"They want that protection in the event that they write an important check for their mortgage or their rent, they want to make sure that check clears and that the bank covers it for them."
So far, nothing definitive from Congress on the overdraft fee and protection legislation.
