Bill Text: NJ A4653 | 2018-2019 | Regular Session | Amended
Bill Title: Requires State-chartered financial institutions to adhere to certain disclosure and consumer protection practices regarding automatic overdraft protection services.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Introduced - Dead) 2018-12-03 - Reported out of Assembly Comm. with Amendments, 2nd Reading [A4653 Detail]
Download: New_Jersey-2018-A4653-Amended.html
ASSEMBLY, No. 4653
STATE OF NEW JERSEY
218th LEGISLATURE
INTRODUCED OCTOBER 22, 2018
Sponsored by:
Assemblyman VINCENT MAZZEO
District 2 (Atlantic)
Assemblyman JOHN F. MCKEON
District 27 (Essex and Morris)
Co-Sponsored by:
Assemblymen Armato, Benson and Assemblywoman Murphy
SYNOPSIS
Requires State-chartered financial institutions to adhere to certain disclosure and consumer protection practices regarding automatic overdraft protection services.
CURRENT VERSION OF TEXT
As reported by the Assembly Financial Institutions and Insurance Committee on December 3, 2018, with amendments.
An Act concerning overdraft protection services offered by certain financial institutions and supplementing Title 17 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Account" means a checking account, savings account or other deposit account, held either directly or indirectly by a financial institution and established for personal, family or household purposes.
"Automated teller machine" means any electronic information processing device located in the State of New Jersey which accepts or dispenses cash in connection with a credit or deposit account. The term does not include tellers' stations staffed by a person or other manned facilities.
"Automatic overdraft protection service" means a service provided by a financial institution in which the institution automatically covers a financial transaction such as a check, point-of-sale transaction, debit card purchase, automatic payment, electronic transfer fund or automated teller machine withdrawal for which a consumer lacks sufficient funds in a credit or deposit account to cover that transaction.
"Check" means any check as defined in N.J.S.12A:3-104, share draft, negotiable order of withdrawal, or similar means of making payment or transfers to third parties or others which is drawn on an account in a financial institution and is payable on demand.
"Consumer" or "account holder" means a natural person who is a resident of this State.
"Debit card" means any instrument or device, whether known as a debit card, automated teller machine card, or by any other name, issued with or without fee by a financial institution, for the use of the debit card holder in obtaining money, goods, services or anything else of value through the electronic authorization of a financial institution to debit the debit card holder's account.
"Electronic fund transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, that is initiated through an electronic terminal, telephone, or computer or magnetic tape for the purpose of ordering, instructing or authorizing a financial institution to debit or credit an account.
"Financial institution" or "institution" means any bank, savings bank, savings and loan association, building and loan association or credit union organized or doing business under the laws of this State and supervised by the Commissioner of Banking and Insurance.
"Overdraft protection fee" or "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 an account is held even though there are insufficient funds in the account to cover checks or other debits.
"Periodic account statement" means any written statement provided on a regular basis at the end of a periodic cycle by a financial institution to an account holder summarizing all debits and credits to an account held by the account holder during a periodic cycle.
2. In the case of an account of a consumer at a financial institution, an automatic overdraft protection service shall not be provided and an overdraft protection fee shall not be imposed on the account for any extension of funds by the institution to cover a check or other debit for which there are insufficient funds in the account to pay that check or other debit, unless:
a. The financial institution:
(1) provides prospective account holders with information regarding the institution's automatic overdraft protection service in all marketing materials and at the time of establishing the account, and notifies and discloses the terms and conditions associated with these services to existing account holders; and
(2) has waited at least three business days after opening of an account to offer the overdraft protection service;
b. The financial institution provides prospective and existing account holders with the opportunity to enroll in the overdraft protection services and also to discontinue that enrollment and provides information about any alternative overdraft products that are available, including a clear explanation of how the terms and fees for those alternative services and products differ;
c. The consumer provides written consent to be enrolled in an automatic overdraft protection service offered by the financial institution and to have those services performed on the account in the event of an overdraft;
d. The overdraft protection fee is imposed pursuant to the terms of a written agreement with the consumer which discloses, in a clear and conspicuous manner:
(1) the amount of any fee imposed in connection with paying an overdraft through an automatic overdraft protection service, which service shall not provide in excess of one overdraft protection fee in any single calendar month nor more than six overdraft protection fees in any single calendar year, per transaction account;
(2) the categories of transactions for which a fee for payment of an overdraft may be imposed, including whether an overdraft may be created by withdrawals at automated teller machines, electronic fund transfers, point-of-sale transactions, debit card purchases, automatic payments, checks and other means that will be covered and a fee imposed;
(3) the total number of overdrafts that will be covered on a monthly basis, or within a time period specified within the terms and conditions of the documents issued to prospective and existing account holders;
(4) the time period by which the consumer shall repay or cover any extension of credit in the form of payment of an overdraft;
(5) the circumstances under which the institution in which an account is held will or will not pay an overdraft;
(6) the factors used by the institution to determine whether an automatic overdraft protection service is activated as to the account; and
(7) any other information required to be disclosed, as may be prescribed by regulation adopted by the Commissioner of Banking and Insurance.
3. a. A financial institution shall promptly notify a consumer, through a reasonable means selected by the consumer, when overdraft protection has been accessed with respect to the consumer's account, which notification shall be no later than the day on which the access occurs. The notification shall include:
(1) the date of the transaction;
(2) the type of transaction;
(3) the overdraft amount;
(4) the overdraft protection fee, if any;
(5) the amount necessary to return the account to a positive balance; and
(6) whether the participation of a consumer in an overdraft protection program will be terminated if the account is not returned to a positive balance within a given time period.
b. A financial institution shall separately and conspicuously disclose information about the fee, including the transaction type associated with the fee each time the fee is imposed, in any periodic account statement provided to the consumer with respect to the account.
4. a. A financial institution shall not charge more than one overdraft protection fee in any single calendar month, and not more than six overdraft protection fees in any single calendar year, per transaction amount.
b. The amount of any overdraft protection fee shall be reasonable and proportional to the financial institution's costs in providing the overdraft protection for that transaction, including the financial institution's cost of funds and other costs directly associated with the transaction.
c. A financial institution shall post transactions with respect to transaction accounts in a manner so that overdraft protection fees and nonsufficient fund fees are kept to a minimum.
d. A financial institution shall not charge an overdraft protection fee on any category of transaction, if the overdraft results solely from a debit hold amount placed on a transaction account that exceeds the actual dollar amount of the transaction.
e. A financial institution shall provide to consumers who have not consented to participate in an overdraft protection program, transaction accounts having the same terms, conditions, or other features as those that are provided to consumers who have consented to participate in overdraft protection programs, except for features of the overdraft protection service.
5. It shall be a violation of this act if a financial institution:
a. Does not extend funds under the circumstances set forth in any disclosure documents issued to prospective and existing account holders to cover an overdraft incurred on an account of a consumer at the institution if the account holder enrolls in those services and provides written consent to have those services performed on the account;
b. Reserves the right to extend funds to pay any overdraft on a discretionary basis in situations in which the institution sets forth in its terms and conditions that the institution will extend credit to cover all overdrafts on such account; or
c. Provides automatic overdraft protection services on an account without first obtaining the express written consent of a prospective or existing account holder.
6. A financial institution which violates this act shall be subject to a fine of not more than 1[$5,000] $1,0001 for each violation. The fine shall be collected by the Commissioner of Banking and Insurance in a summary manner pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).
7. The Commissioner of Banking and Insurance shall adopt rules to implement the provisions of this act pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), including rules establishing requirements for financial institutions to provide adequate disclosure of the terms and conditions associated with automatic overdraft protection services to prospective and existing account holders, through advertising, account information pamphlets, fee schedules and other appropriate means.
8. Failure to fulfill any obligation under this act shall not be considered to be the exercise of a power, right, benefit, or privilege under the parity provisions of P.L.1981, c.163 (C.17:9A-24b1), section 48 of P.L.1963, c.144 (C.17:12B-48), or section 12 of P.L.1984, c.171 (C.17:13-90), and it shall not be a defense to a violation of this act that the failure to fulfill any provision of the act is an exercise of such power, right, benefit, or privilege.
9. This act shall take effect on the 1[90th] 365th1 day next following enactment.
