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Committee sends overdraft-fee reform bill to the House after debate on preemption and impacts
Summary
House Bill 1553, sponsored by Representative Sanchez, would cap overdraft and NSF fees, limit daily charges, require clearer disclosures and stop NSF fees on declined transactions; the Commerce Committee reported the bill to the House 14-12 after members raised questions about federal preemption and impacts on community banks.
The Commerce Committee voted to report House Bill 1553 to the House after debate over fee caps, preemption of federal institutions and impacts on community banks.
Representative Sanchez, the bill’s sponsor, told the committee the bill “does 4 simple things to protect customers.” She summarized the changes as capping overdraft and non-sufficient-funds (NSF) fees, limiting how many times those fees may be charged per customer per day, requiring clear upfront disclosure of fees and stopping NSF fees on declined transactions. “In other words, you can't be charged when a transaction doesn't go through,” Sanchez said.
Sanchez framed the measure as a response to what she described as excessive fees that disproportionately affect low- and moderate-income people and seniors. She said her review of state-chartered institutions’ publicly listed fees found that “only 4 credit unions charge overdraft fees of $15 or less” and that many institutions charge much higher fees, sometimes with compounding daily limits that raise total costs significantly.
Committee members raised several concerns. One member asked whether federally chartered banks would be covered; staff replied that federally chartered institutions would likely be preempted by federal law. Another member expressed concern that the bill would affect community banks in their districts and questioned whether those institutions would be able to compete if subject to the fee limits.
Representative Yaursey voiced opposition on constitutional grounds, saying, “I oppose this bill for the simple fact that, its constitutionality is at best questionable. In my opinion, article 6, section 2 of the US constitution forbids conflicting state law to supersede or preempt federal law. I think a pretty strong case can be made that this bill is unconstitutional.” Representative Glean suggested addressing overdrafts through financial literacy efforts and prevention rather than statutory fee caps.
After discussion, the committee recorded 14 ayes and 12 nays and reported the bill to the full House. The committee did not adopt amendments in committee; further changes could occur on the House floor.
