Our system has the checks pay from highest to lowest. So depending on the funds in the account, the larger checks will be paid first. We have a client that said under new legislation they have the right to choose for checks to be paid highest to lowest or lowest to highest. Is that correct? If so, can you please direct me to information on the legislation? Thank you!!

My understanding is that WE (the bank) have the right to choose which order to post. I haven't heard that the consumer can select the option...

This is a PENDING legislation right now. Too many banks did transaction posting from highest to lowest to increase their fee income, that now the "powers that be" are interested. This would include reorganizing all transactions (not just checks, but ACH and debit card posting) and the most likely result (if it passes) is that banks will have to post things in chronological order, not $ amount order. Which I think makes better sense anyway.

So no, the client is not correct just yet. But he might be correct soon.

Interesting - thank you for the information! Do you or anyone else happen to have information or a link on the actual legislation details? Thanks!!

Would you reference the pending legislation for me, please. I'd like to see the language they're considering. Thanks.

I'm going to get the detailed info from our Chief Compliance Officer. He was just talking about this in our meeting today (regarding the Reg E changes) but I have been hearing about this since around September.

Here is a fairly recent article from Capitol Hill that describes some of the proposed changes:

http://thehill.com/homenews/house/69049-rep-hinojosa-drops-support-of-bank-overdraft-bill

This is another part of it:

[The bill] would restrict the number of overdraft fees that banks may charge to one per month or six per year and also limits the total fees that banks may charge. Under the bill, banks would have to charge fees proportional to the overdraft.

I wonder why the folks that are so excited about this bill can't do the math to understand that they could quickly become "unbankable" when their accounts are closed due to excessive overdrafts or end up in court with merchants for writing bad checks that are bouncing all over town? Do they really think that the banks are going to provide fee-free loan servicing via check writing?

I found this below:

Text of H.R. 1456: Consumer Overdraft Protection Fair Practices Act


Mar 12, 2009 - Introduced in House. This is the original text of the bill as it was written by its sponsor and submitted to the House for consideration. This is the latest version of the bill currently available on GovTrack.


HR 1456 IH
111th CONGRESS
1st Session
H. R. 1456
To extend the protections of the Truth in Lending Act to overdraft protection programs and services provided by depository institutions, to require customer consent before a depository institution may initiate overdraft protection services and fees, to enhance the information made available to consumers relating to overdraft protection services and fees, to prohibit systematic manipulation in the posting of checks and other debits to a depository account for the purpose of generating overdraft protection fees, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
March 12, 2009
Mrs. MALONEY (for herself, Mr. ACKERMAN, Mr. MILLER of North Carolina, Mr. ELLISON, Ms. SPEIER, Mr. TIERNEY, and Ms. ESHOO) introduced the following bill; which was referred to the Committee on Financial Services
________________________________________
A BILL
To extend the protections of the Truth in Lending Act to overdraft protection programs and services provided by depository institutions, to require customer consent before a depository institution may initiate overdraft protection services and fees, to enhance the information made available to consumers relating to overdraft protection services and fees, to prohibit systematic manipulation in the posting of checks and other debits to a depository account for the purpose of generating overdraft protection fees, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘Consumer Overdraft Protection Fair Practices Act’.
SEC. 2. RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS OR SERVICES.
(a) Truth in Lending Act Amendments-
(1) DEFINITION- Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is amended by adding at the end the following new subsection:
‘(cc) Terms Relating to Short-Term Extensions of Credit Under Overdraft Protection Programs-
‘(1) OVERDRAFT PROTECTION FEE- The term ‘overdraft protection fee’ means any fee or charge imposed in connection with any account on which checks or other debits are paid by the institution in which such account is held even though there are insufficient funds in the account to cover such checks or other debits, unless such fee or charge--
‘(A) is imposed on an incidental basis as a customer accommodation and no more than 3 such overdraft fees are imposed during any calendar year;
‘(B) is imposed in connection with an extension of credit through an overdraft line of credit program where such fee or charge was considered a finance charge under this title, as in effect immediately prior to the enactment of the Consumer Overdraft Protection Fair Practices Act; or
‘(C) has been disclosed in connection with a program under which the overdraft is covered by funds transferred from another deposit, share, or other asset account.
‘(2) OTHER TERMS-
‘(A) CHECK- The term ‘check’ has the same meaning as in section 3(6) of the Check Clearing for the 21st Century Act.
‘(B) OTHER DEBITS- The term ‘other debits’ includes withdrawals from an account by the consumer through an automated teller machine and electronic fund transfers from an account that are initiated or authorized by the consumer.
‘(C) ELECTRONIC FUND TRANSFER- The term ‘electronic fund transfer’ has the same meaning as in section 903.
‘(D) ACCOUNT- The term ‘account’ means any account intended for use by and generally used by a consumer primarily for personal, family, or household purposes into which the consumer deposits funds.
‘(E) TRANSACTION ACCOUNT- The term ‘transaction account’ has the same meaning as in section 19(b)(1)(C) of the Federal Reserve Act.’.
(2) RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS OR SERVICES-
(A) IN GENERAL- Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by adding at the end the following new section:
‘Sec. 140A. Restrictions on overdraft protection programs or services
‘(a) In General- In the case of any transaction account of a consumer at any institution, no overdraft protection fee may be imposed on such account for any extension of funds by the institution to cover any check or other debit for which there are insufficient funds in the consumer’s account to pay such check or other debit, unless--
‘(1) the consumer has provided specific written consent to any program or service that provides for charging of such fees in connection with any such extension of funds;
‘(2) such fee is imposed pursuant to the terms of a written agreement with the consumer which discloses, in a clear and conspicuous manner--
‘(A) the amount of any fee imposed in connection with paying an overdraft;
‘(B) any applicable disclosure required by this title in connection with such extension of credit, including the disclosures required by section 127;
‘(C) the categories of transactions for which a fee for payment of an overdraft may be imposed, including whether an overdraft created by withdrawals at automated teller machines or other electronic fund transfers will be covered and a fee imposed;
‘(D) the time period by which the consumer must repay or cover any extension of credit in the form of payment of an overdraft; and
‘(E) the circumstances under which the institution in which an account is held will not pay an overdraft; and
‘(F) other information required to be disclosed by regulation;
‘(3) such fee is separately and conspicuously disclosed, each time the fee is imposed, in any periodic statement provided to the consumer with respect to such account and is included in the calculation of the annual percentage rate as required by sections 107 and 127(b)(6).
‘(b) Clarification Relating to Overdraft Fees- In the case of any transaction account of a consumer at any institution, the prohibition against an overdraft protection fee under subsection (a) shall apply regardless of whether the amount of such fee is the same as, or less than, any fee imposed by the institution with respect to such account for a check or other debit that is returned unpaid.
‘(c) Prohibition on Misrepresentations- If any institution--
‘(1) will not extend funds under specific circumstances to cover an overdraft in any transaction account of a consumer at the institution; or
‘(2) reserves the right to extend funds to pay any such overdraft on a discretionary basis,
any representation by such institution that the institution will extend credit to cover all overdrafts on such account shall be a violation of this title.’.
(B) CLERICAL AMENDMENT- The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 140 the following new item:
‘140A. Restrictions on overdraft protection programs or services.’.
(3) RESTRICTIONS ON ADVERTISING OF OVERDRAFT PROTECTION PROGRAMS OR SERVICES-
(A) IN GENERAL- Chapter 3 of the Truth in Lending Act (15 U.S.C. 1661 et seq.) is amended by adding at the end the following new section:
‘Sec. 148. Restrictions on advertising of overdraft protection programs or services
‘(a) In General- In the case of an institution that maintains transaction accounts for consumers and offers a program or service under which the institution pays any overdraft on the account in exchange for payment of an overdraft protection fee, the institution may not make any of the following representations or statements with respect to such program or service in any advertisement or promotion:
‘(1) Any representation or statement describing a transaction account as free or no cost if the account includes, or is promoted as including, overdraft protection services that involve the payment of overdraft protection fees.
‘(2) Any representation or statement encouraging use of the account as a service to meet short-term credit needs or to obtain advances on a consumer’s next payment of salary, wages, benefits, or other income.
‘(3) Any representation or statement that the financial institution will honor all checks or other debits presented against the account, if the institution retains discretion at any time not to honor any check or other debit presented.
‘(b) Regulations- The Board shall prescribe regulations implementing the restrictions set forth in subsection (a) pursuant to the authority of the Board under section 18(f) of the Federal Trade Commission Act, and may, by regulation or order, restrict such additional acts or practices that the Board finds to be unfair or deceptive in connection with the offering, operation, and advertising of overdraft protection programs and services.’.
(B) CLERICAL AMENDMENT- The table of sections for chapter 3 of the Truth in Lending Act is amended by inserting after the item relating to section 147 the following new item:
‘148. Restrictions on advertising of overdraft protection programs or services.’.
(4) CLARIFICATION OF FINANCE CHARGE- Section 106(a) of the Truth in Lending Act (15 U.S.C. 1605(a)) is amended by adding at the end the following new paragraph:
‘(7) Overdraft protection fee.’.
(b) Electronic Fund Transfer Act Amendments- Section 904 of the Electronic Fund Transfer Act (15 U.S.C. 1693b) is amended by adding at the end the following new subsection:
‘(e) Restrictions on Overdraft Protection Services and Fees-
‘(1) IN GENERAL- A financial institution that holds a consumer’s account may not impose an overdraft protection fee on the account in connection with any payment of an electronic fund transfer initiated by the consumer at an automated teller machine in spite of a lack of sufficient funds in the consumer’s account to pay such electronic fund transfer, unless--
‘(A) the consumer has affirmatively requested such service pursuant to section 140(a)(1), including specific consent to allowing overdrafts at an automated teller machine or by debit card at a point-of-sale terminal;
‘(B) the financial has provided a notice to the consumer after the transaction is initiated and before the consumer is irrevocably committed to completing the transaction, that the electronic fund transfer the consumer has requested will result in an overdraft protection fee, together with the amount of any such fee;
‘(C) the consumer elects to continue in the manner necessary to effect the requested electronic fund transfer after receiving such notice; and
‘(D) the overdraft protection fee imposed in connection with such transaction is clearly disclosed in the written documentation of the electronic fund transfer required by section 906(a).
‘(2) PROHIBITION ON FEE IN ABSENCE OF NOTICE- If the notice required by paragraph (1)(B) is not feasible, the financial institution may not charge an overdraft protection fee in connection with any payment of an electronic fund transfer initiated by the consumer at an automated teller machine or by debit card at a point-of-sale terminal in spite of a lack of sufficient funds in the consumer’s account to pay such electronic fund transfer.
‘(3) DISCLOSURE OF ACCOUNT BALANCES- In the case of any financial institution that offers a program or service under which the institution pays any overdraft on a consumer’s account in exchange for the imposition of an overdraft protection fee in accordance with paragraph (1), the financial institution shall, in response to a balance inquiry initiated by the consumer at an automated teller machine operated by the financial institution, disclose only the actual dollar balance in the consumer’s account at the time of the request, which shall not include any additional amount of credit or overdraft protection the financial institution will pay under any agreement with the consumer that permits the imposition of the overdraft protection fee.
‘(4) OVERDRAFT PROTECTION FEE DEFINED- For purposes of this subsection, the term ‘overdraft protection fee’ has the same meaning as in section 103(cc)(1).’.
(c) Expedited Funds Availability Act Amendments-
(1) DEFINITION- Section 602 of the Expedited Funds Availability Act (12 U.S.C. 4001) is amended by adding at the end the following new paragraph:
‘(26) OVERDRAFT PROTECTION FEE- The term ‘overdraft protection fee’ has the same meaning as in section 103(cc)(1) of the Truth in Lending Act.’.
(2) RESTRICTIONS ON OVERDRAFT PROTECTION FEES- Section 607 of the Expedited Funds Availability Act (12 U.S.C. 4006) is amended by adding at the end the following new subsection:
‘(f) Restrictions on Overdraft Protection Fees- A depository institution may not--
‘(1) impose an overdraft protection fee on an account at such institution for paying any check drawn on the account in spite of a lack of sufficient funds in the account to pay such check or any similar activity unless the accountholder has affirmatively requested such service pursuant to section 140(a)(1) of the Truth in Lending Act; or
‘(2) engage in a pattern or practice of delaying the posting of any deposit in an account, or manipulating the process of posting any check or other debit against an account, if such pattern or practice results in 1 or more overdrafts that trigger payment by the accountholder of an overdraft protection fee.’.

I think it makes sense to force banks to post transactions in chronological order. I've always felt this was a very shady way of obtaining more fee income.

If you have $1200 in your account and the following transactions post: ACH debit $300, ACH debit $500, ATM withdrawal $100, Debit Card purchase $100, Check $800 - in the chronological order this would result in only ONE overdraft fee for the check. In the "real world" right now, most banks (including mine) would post the check first and then everything else from largest to smallest, resulting in FOUR fees. And then my bosses wonder why people are upset...

BUT - I do NOT agree with the whole "limiting OD fees" altogether and having people agree to pay their checks into the OD, etc. Most people will not understand it well enough and it will result, like BrendaC said, with people bouncing checks all over the place, being charged even MORE fees by the merchants, having their accounts be closed, etc.

...and as that customer, do you want us to return the $600 worth of overdrawn items, or covered them for you? Either you realize the bank charges will be less than the merchants charge, or you so poorly handle a checkbook, you do not deserve a checking account.

The ability to avoid an OD fee is soley in the hands of the consumers. It is solely their responsibility to make sure that they have suffieicint collected funds in their account before they start spending. The bank can never intentionally force an overdraft unless the consumer has overspent what was not theirs.

I don't see how anyone can post in strict chronological order or strict high to low or low to high order. Once the cash is out the bank - its out as in ATM withdrawals,cks cashed at teller lines. Once that debit pos purchase is made - its my understanding that they cannot be returned.

Unless everyone is real time, I don't see how you can implement some of these ideas. We don't know until end of day processing.

I know what you're saying (I am always preaching "personal accountability" on the part of the consumer") but in my example, the person had the money to pay all their transactions in the order they were received. That check is the only problem. And yes, we could bounce it or pay it, but we should not bounce all the other transactions behind it that were fully covered by the balance. I especially have a problem with "rearranging" ACH transaction. To me, ACH is posted by 9am and if the money was there, it's a good transaction. Don't flip those ACHs behind a check that went through inclearing overnight - they already posted hours before.

There is S. 1799 that Sen. Dodd sponsored and there is HR 3904 which Rep. Maloney and Rep. Frank sponsored.

The following wording is found in S. 1799 and HR 3904.
(3) POSTING ORDER- In order to minimize overdraft coverage fees charged to consumers, each depository institution shall post transactions with respect to transaction accounts in such a manner that the consumer does not incur avoidable overdraft coverage fees.

[/quote] The ability to avoid an OD fee is soley in the hands of the consumers. It is solely their responsibility to make sure that they have suffieicint collected funds in their account before they start spending. The bank can never intentionally force an overdraft unless the consumer has overspent what was not theirs.[/quote]

I know what you're saying (I am always preaching "personal accountability" on the part of the consumer") but in my example, the person had the money to pay all their transactions in the order they were received. That check is the only problem. And yes, we could bounce it or pay it, but we should not bounce all the other transactions behind it that were fully covered by the balance. I especially have a problem with "rearranging" ACH transaction. To me, ACH is posted by 9am and if the money was there, it's a good transaction. Don't flip those ACHs behind a check that went through inclearing overnight - they already posted hours before. [/quote]

Agness, you are too kind. If they have enough money in the account for all transactions there would not be a question of what to do with the $800. The customer spent more than the amount in the account. Acccording to what I understand you to say, they spent $1,800 and the balance in the account was $1,200. I agree with Just Jay, people need to take responsibility and not expect banks to give them a free loan.

It's a bill. It is not "new" legislation. It is not "pending" legislation. It may not pass or it may be passed with so many amendments that the end product is completely unrecognizable.

Venting here is fine, but the "make a difference" response is to write your Congressional representatives. I would not press the personal accountability too hard. Someone might suggest that the issue would not have matured had banks adopted that philosophy and relayed it to their customers rather than encouraging them to order payments they could not fund.

^^^

The party is over for both banks and consumers:

For banks - it means no more reliance on fat juicy OD fees.
For consumers - it means you can't party like it's 1999 and expect the bank to clean up your mess.

Accountability is a sword that cuts both ways - both personal and corporate.

Yes, but if that $800 check was for the customer's house note, and it was the only one that was returned, they would be pitching a fit about that. They wouldn't care if you saved them four fees, they will say that YOU (not they) bounced their house note.

For all that have been in the banking industry for a REALLY long time you know the reason the paying into the overdraft was organized with highest dollar first was exactly for the reason FPB Bill stated. A long time ago before the dinosaurs died out, OD items were paid on a case by case basis and it was based on the # of items to be paid instead of the dollar amount. However, Mr. Consumer got angry then because the largest checks being returned were for.....his house, car and electricity. Banks changed the processing to largest items first to appease the consumer who forgot to keep track of their bank balance.
Now, 20 years later, they have decided they no longer like the bank paying the house note and bouncing all of the smaller checks, so we are once again looking at changing our processing to appease the few who complain the loudest.

At my prior bank, we were able to pay in order of on us items, electronic debits and then by check number (order created by the customer). I thought that was great.