Why a Longstanding Legal Doctrine Supports Limiting Bank Overdraft Fees

Over the past decade, overdraft fees and abuses have spiraled out of control, snaring millions of consumers while generating billions in profits for banks. In 2011, consumers paid $29.5 billion in overdraft fees.

A new white paper by the National Consumer Law Center explores why overdraft fees should be subject to a “reasonable and proportional" standard, how overdraft fees are currently excessive and unreasonable, and why the ability to charge excessive overdraft fees encourages banks to engage in abusive practices to maximize overdrafts.  The white paper also describes how excessive overdraft fees are contrary to a centuries-old legal doctrine that prohibits punitive damage clauses in contracts. 

 The Consumer Financial Protection Bureau (CFPB) has legal avenues to restore the standard of “reasonableness” to overdraft fees. One venue is through the Credit Card Accountability, Responsibility, and Disclosures (CARD) Act of 2009, by treating debit cards as “credit cards” for which penalty fees must be “reasonable and proportional.”  Another avenue for the CFPB is to use its authority to prevent unfair, deceptive, or abusive practices.

Download a three-page issue brief with key points and solutions:
Common Sense from the Common Law: Why a Longstanding Legal Doctrine Supports Limiting Bank Overdraft Fees to a “Reasonable and Proportional” Standard at:

Download the white paper at:

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