SACRAMENTO, Calif.–A new bill is being introduced in the California Assembly that seeks to put limits on the NSF fees credit unions and banks can charge.
The legislation is being backed by Tim Grayson (D-15), the chair of the Assembly Banking and Finance Committees, who said in a statement accompanying release of his proposal that over the last decade the banking industry has been “rife with fee creep,” which he described as the “gradual and growing use of questionable fees often charged to those consumers who least can afford them.”
“These ‘junk fees’ are often disproportionate to the actual cost of providing a service to a consumer, and banks and other financial institutions have increasingly relied on them to increase their profits,” Grayson stated.
Grayson said his bill, AB 2017, would prohibit a bank or credit union from charging consumers an NSF fee when they attempt to make a purchase – and it’s declined immediately by the bank or credit union due to nonsufficient funds.
‘Put a Stop to This Practice’
“Said another way, banks should not be charging consumers fees for transactions that are declined right away, and my bill will put a stop to this practice,” Grayson stated. “…Though they are different, NSF fees and overdraft fees are often discussed together when we discuss the ways financial institutions have become over-reliant on junk fees. Today, the combined costs of overdraft and NSF fees are a higher cost to consumers than the combined cost of periodic maintenance fees and ATM fees.”
Grayson said NSF fees, which average around $30, hit the financially vulnerable the hardest and are an “unfair practice because consumers receive no service at all in exchange for the fee.”
State at the Center of Debate
California has been the epicenter for states taking on overdraft/NSF fees. Earlier this year Senate Bill 1075 was introduced, which targeted such fees at California’s state-chartered CUs. The state’s credit union’s have aggressively pushed back on such laws.
State law also requires state-chartered institutions to publish the income they derive from OD/NSF fees, data that has received particular scrutiny from consumer groups and the media in the state.