FAIR Act Section-by-Section
Section 1. Short Title.
This Act may be referred to as the ‘‘Fairness and Accountability in Receiving Overdraft
Coverage Act of 2009’’ or the ‘‘FAIR Overdraft Coverage Act”
Section 2. Findings and Purpose.
The purpose of the Act is to protect consumers by limiting abusive and misleading
overdraft coverage fees and practices, and by providing meaningful disclosures and
consumer choice in connection with overdraft coverage fees.
Section 3. Definitions.
Defines several terms related to overdraft protection programs including: non-sufficient
fund fee, overdraft, overdraft coverage, overdraft coverage fee, overdraft coverage
The term overdraft coverage fee means any fee or charge assessed in connection
with overdraft coverage, or in connection with any negative account balance that
results from overdraft coverage, excluding fees or charges relating to overdraft
lines of credit or transfers from an account linked to another transaction account
or line of credit. The section explicitly states that the fee shall be considered a
finance charge, but shall not be included in the calculation of an interest rate for
the purposes of the Federal Credit Union Act.
Section 4. Fair Marketing and Provision of Overdraft Coverage Programs.
Prohibits unfair and deceptive practices with respect to overdraft coverage programs.
Requires institutions offering overdraft coverage programs to clearly and conspicuously
disclose any overdraft coverage fees in marketing material.
Requires depository institutions to get a written opt-in from a consumer before charging
an overdraft fee as a result of a withdrawal at an ATM or a debit card transaction. The
depository institution retains the discretion to pay overdrafts beyond this limit without
assessing a fee.
Requires disclosure (1) that the consumer may be charged not more than once per month
and not more than six times in one year for overdraft coverage; (2) of alternatives
products that are available; (3) other information that the Fed may require.
Requires the depository institution to include in the periodic statement the dollar amount
of all overdraft coverage fees charged to the consumer during the period and year-to-date.
Prohibits depository institutions from including the amount available under the overdraft
coverage program in the account balance.
Requires prompt notification of the consumer when an overdraft occurs including the
date of the transaction, the type of transaction, the overdraft amount, the overdraft
coverage fee, the amount necessary to return the account to a positive balance, and
whether the participation of the consumer in the program will be terminated if the balance
is not returned to positive within a given period of time
Requires prompt notice to the consumer if the institution terminates or suspends access to
an overdraft program, including clear rationale for the action.
Requires depository institutions to warn consumers at ATM machines if the transaction
would trigger overdraft coverage fees and provide the consumer the opportunity to cancel
Limits overdraft coverage fee assessment to one per month per transaction account and
not more than six per year per transaction account.
Requires overdraft fees to be proportional to the cost of processing the transaction. [The
Fed, OCC, OTS, FDIC and NCUA may issue rules to provide an amount for any
overdraft coverage fee that is presumed to be reasonable.]
Requires the posting of transactions in such a manner that the consumer does not incur
avoidable overdraft coverage fees.
Prohibits charging an overdraft fee on any transaction if the overdraft results solely from
a debit hold that exceeds the actual dollar amount of the transaction.
Prohibits discrimination against consumer who do not opt-in to overdraft coverage
Prohibits the assessment of a non-sufficient fund fee with respect to an ATM or debit
Prohibits the reporting of negative information to a consumer reporting agency as a result
of an overdraft fee when the overdraft amounts and overdraft fees are paid under the
terms of the program.
Section 5. Regulatory Authority of the Board.
Requires the Fed (in consultation with the OCC, FDIC, OTS and NCUA, to issue final
rules necessary to carry out the Act within nine months.
Gives the Board the authority to require warnings at point-of-sale locations, after
considering the views of the GAO (in the report under Section 6), if the cost of providing
such warnings does not outweigh the benefit to consumers.
Section 6. Study and Report by the GAO.
Directs the GAO to conduct a study regarding whether it is feasible for a depository
institution to (a) provide a warning to a consumer at a point-of-sale location that
completing the transaction may trigger overdraft coverage fees and (b) provide the
consumer with the opportunity to cancel the point-of-sale transfer before the transaction
is completed. The report is due to Congress not later than one year after the date of
Section 7. Effective Date.
The Act shall become effective one year after the date of enactment, whether or not the
rules of the Board are issued in final form.
During the period between enactment and the effective date, depository institutions may
not increase overdraft coverage fees or non-sufficient funds fees.