Provides that charges imposed by certain state chartered banking institutions in connection with a check or other written order drawn on insufficient funds shall not exceed the greater of five dollars or the pro rata share of such state chartered banking institution's total direct costs and charge-off losses for providing non-covered overdraft credit.
This bill would cap certain overdraft and insufficient-funds charges imposed by specified state-chartered banking institutions in New York. For banks, trust companies, savings banks, savings and loan associations, and related institutions, the bill provides that fees tied to checks or other written orders drawn on insufficient funds may not exceed the greater of $5 or the institution’s pro rata share of its total direct costs and charge-off losses for providing non-covered overdraft credit in the previous year. The bill also defines key terms such as “consumer account,” “overdraft credit,” and “non-covered overdraft credit,” and it applies the same general fee-limit framework across several sections of the Banking Law.
The measure adds a new Banking Law section requiring state-chartered banking institutions to calculate the allowable fee cap based only on costs and losses specifically traceable to non-covered overdraft services. It specifies what may be included in that calculation, such as cost of funds, net charge-off losses, and operating expenses for overdraft programs, while excluding general overhead and certain error-related losses. It also requires that all non-covered overdraft transactions from the prior year be included in the calculation, and it takes effect immediately.
The bill’s impact would be to constrain how much certain state-chartered institutions can charge consumers for overdraft-related transactions and returned-item fees, potentially reducing revenue from overdraft programs and lowering consumer costs. It would amend multiple provisions of the Banking Law, including sections governing banks, savings banks, and savings and loan associations, and it would create a new section establishing the methodology for calculating overdraft-related costs and losses. Consumers with checking or transaction accounts would be the primary beneficiaries, while affected financial institutions would need to adjust fee schedules and accounting practices.
Based on the available context, the general sentiment appears consumer-protective and reform-oriented, with the bill framed as a fee-limiting measure rather than a broad banking overhaul. There is no recorded committee transcript or vote history provided, so there is no documented floor or committee debate to indicate formal support or opposition. The bill’s structure suggests an intent to standardize and limit overdraft charges, which typically aligns with concerns about excessive banking fees.
The main point of contention likely would be the formula-based cap itself, especially the requirement that fees not exceed the greater of $5 or a pro rata share of direct costs and charge-off losses. Banks and other covered institutions may object that the cap could restrict their ability to recover program costs or manage risk, while consumer advocates would likely support the lower-fee protection. Another possible issue is the complexity of the cost-allocation methodology, which could create compliance and accounting disputes over what counts as a directly traceable overdraft cost.
The bill amends several provisions of the New York Banking Law to limit overdraft and insufficient-funds charges for certain state-chartered banking institutions and to define how those charges are calculated. It adds a new section, 9-q, establishing a cost-and-loss methodology for non-covered overdraft credit, and revises sections governing banks, savings banks, and savings and loan associations so that maximum charges are tied to either $5 or a pro rata share of direct overdraft-related costs and charge-off losses. The practical effect is to narrow fee authority for covered institutions and impose a standardized calculation framework on overdraft pricing.
The available materials suggest a generally favorable, consumer-focused sentiment toward the bill, with the measure presented as a limit on bank fees rather than a controversial expansion of regulation. No committee transcript or vote record is available, so there is no documented opposition or support from legislators in the provided context. The bill’s language indicates an effort to curb overdraft charges and make them more closely tied to actual costs, which is typically associated with consumer protection goals.
The likely contention centers on whether the bill’s fee cap is too restrictive and whether the required cost-calculation method is workable in practice. Financial institutions subject to the bill may argue that limiting charges to the greater of $5 or a pro rata share of direct costs and charge-off losses could reduce revenue and complicate compliance, especially because the bill excludes general overhead but requires evidence of costs being specifically traceable to overdraft services. Consumer advocates, by contrast, would likely support the cap as a way to prevent excessive overdraft fees and returned-item charges. No explicit objections or amendments are documented in the provided record.