Consumers might benefit from new rules for overdraft fees if two U.S. senators succeed with a newly announced bill.

Senator Cory Booker (D-N.J.) and Senator Sherrod Brown (D-Ohio) would like to prohibit banks from charging overdraft fees on debit card transactions and ATM withdrawals. Their proposed bill would also limit overdraft fees to one per month and six per year for every checking account.

Senator Booker calls the proposed bill the Stop Overdraft Profiteering Act of 2018.

In a press release provided by Senator Booker’s office, he said the bill “would also mandate that banks post transactions in a manner that minimizes overdraft and nonsufficient fund fees (oftentimes, banks reorder transactions in such a way as to maximize overdraft fees, which can mean, in some cases, that the consumer faces multiple charges.)”

Consumer watchdog groups have long argued that current rules for overdraft fees make it too easy for banks to gouge customers who are living from paycheck to paycheck.

Rebecca Borne, senior policy counsel for the Center for Responsible Lending, assisted in drafting the bill that is not yet available for public view.

In an interview with InsideSources, Borne explains that overdraft fees originated with bounced checks, and that today’s electronic banking allows banks to collect a lot more revenue much more quickly.

The Center for Responsible Lending released a study last month that showed banks have seen an increase of more than two percent each year in the revenue they generate from charging overdraft fees.

The same study determined that one in 10 of the nation’s biggest banks charge additional fees if an overdraft is not repaid within a certain amount of time.

Some banks also have been known to process transactions in a certain high-to-low order as a way to maximize overdraft fees and to allow a customer to accumulate several overdraft fees in single day. Consumer watchdog groups say such practices are proof that new rules for overdraft fees are way overdue.

Borne believes the Stop Overdraft Profiteering Act of 2018 will improve transparency of banking policies and will hold banks more accountable for the fees they charge.

New Rules for Overdraft Fees Needed

According to a 2014 survey by Pew Charitable Trusts, many bank customers don’t remember opting in to their bank’s overdraft protection program, and most say they would rather have a transaction declined rather than pay the average $35 overdraft fee.

An example of someone who would prefer to see a transaction declined could be a student who has $15 in his checking account. He buys a $20 pizza with his debit card, which allows the transaction to go through. He ends up paying a $35 overdraft fee because he was $5 short. That $20 pizza now cost him $55.

If he doesn’t realize his checking account just went in the red, he might use his debit card for a $12 movie ticket later that evening, incurring yet another $35 charge.

Even though he thought he spent $32 total for the day, he really is on the hook for $102. Had he known he was going into overdraft status with the pizza purchase, he might have preferred the charge to have been declined.

New rules for overdraft fees could help our fictional student and other consumers who have paid multiple fees for years.