By Julian Hattem - 07/22/13 07:26 PM EDT
Instead of attributing transactions in the order which they occurred, financial institutions can sometimes post them to charge the largest amounts first. That can have the effect of depleting a consumer’s balance with one large payment and resulting in overdraft fees for each successive transaction, even if they technically occurred first.
In explaining the need for his legislation, Brown cited a recent CFPB study that found broad discrepancy in the way that institutions charge the fees.
According to that survey, fees for the average consumer who overdrew their account result in $225 per year.
The new legislation would require banks to clearly state how they post transactions to a consumer’s account, allow the CFPB to write guidelines to protect Americans from aggressive penalties, monitor banks’ practices and determine whether or not they are predatory.
Brown is the chairman of the Senate Banking subcommittee on Financial Institutions and Consumer Protection.