S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   5016
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                             February 21, 2023
                                ___________
 
 Introduced  by  Sen. SANDERS -- read twice and ordered printed, and when
   printed to be committed to the Committee on Banks
 
 AN ACT to amend the banking law, in relation to  creating  the  consumer
   overdraft protection act
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. The banking law is amended by adding a new article  2-A  to
 read as follows:
                                 ARTICLE 2-A
                     CONSUMER OVERDRAFT PROTECTION ACT
 SECTION 60. LEGISLATIVE INTENT.
         61. DEFINITIONS.
         62. RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS OR SERVICES.
         63. RESTRICTIONS ON ADVERTISING OF OVERDRAFT PROTECTION PROGRAMS
               OR SERVICES.
   §  60.  LEGISLATIVE INTENT. THE LEGISLATURE HEREBY FINDS THAT MANY NEW
 YORK STATE CONSUMERS ARE NOT INFORMED  OF  OVERDRAFT  PROTECTION  AND/OR
 FEES  UNTIL  AFTER  SUCH  EVENT HAS TAKEN PLACE. IT IS THE LEGISLATURE'S
 INTENT TO ENSURE THAT CONSUMERS ARE INFORMED OF THEIR OPTIONS IN  REGARD
 TO  OVERDRAFT  PROTECTION PRIOR TO INCURRING FEES BY ESTABLISHING APPRO-
 PRIATE PROTECTIONS FOR SUCH CONSUMERS.
   § 61. DEFINITIONS. FOR PURPOSES OF THIS ARTICLE, THE  FOLLOWING  TERMS
 SHALL HAVE THE FOLLOWING MEANINGS:
   1.  "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
 NOT MORE THAN THREE SUCH OVERDRAFT FEES ARE IMPOSED DURING ANY  CALENDAR
 YEAR;

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD02862-01-3
              

 S. 5016                             2
 
   (B)  IS  IMPOSED  IN CONNECTION WITH AN EXTENSION OF CREDIT THROUGH AN
 OVERDRAFT LINE OF CREDIT THROUGH AN OVERDRAFT  LINE  OR  CREDIT  PROGRAM
 WHERE  SUCH  FEE  OR  CHARGE  WAS CONSIDERED A FINANCE CHARGE UNDER THIS
 ARTICLE, AS IN EFFECT PRIOR TO THE ENACTMENT OF THIS ARTICLE; 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.  "CHECK"  MEANS  A DRAFT, PAYABLE ON DEMAND AND DRAWN ON OR PAYABLE
 THROUGH OR AT AN OFFICE OF A BANK, WHETHER OR NOT  NEGOTIABLE,  THAT  IS
 HANDLED  FOR  FORWARD COLLECTION OR RETURN, INCLUDING A SUBSTITUTE CHECK
 AND A TRAVELER'S CHECK AND DOES NOT INCLUDE A NONCASH ITEM  OR  AN  ITEM
 PAYABLE IN A MEDIUM OTHER THAN UNITED STATES DOLLARS.
   3.  "OTHER  DEBITS"  MEANS 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.
   4.  "ELECTRONIC FUND TRANSFER" MEANS ANY TRANSFER OF FUNDS, OTHER THAN
 A TRANSACTION ORIGINATED BY CHECK, DRAFT, OR SIMILAR  PAPER  INSTRUMENT,
 WHICH  IS  INITIATED  THROUGH AN ELECTRONIC TERMINAL, TELEPHONIC INSTRU-
 MENT, OR COMPUTER OR MAGNETIC TAPE SO AS TO ORDER, INSTRUCT, OR  AUTHOR-
 IZE  A  FINANCIAL  INSTITUTION  TO DEBIT OR CREDIT AN ACCOUNT. SUCH TERM
 INCLUDES, BUT IS NOT  LIMITED  TO,  POINT-OF-SALE  TRANSFERS,  AUTOMATED
 TELLER  MACHINE  TRANSACTIONS,  DIRECT DEPOSITS OR WITHDRAWALS OF FUNDS,
 AND TRANSFERS INITIATED BY TELEPHONE. SUCH TERM DOES NOT INCLUDE:
   (A) ANY CHECK  GUARANTEE  OR  AUTHORIZATION  SERVICE  WHICH  DOES  NOT
 DIRECTLY RESULT IN A DEBIT OR CREDIT TO A CUSTOMER'S ACCOUNT;
   (B)  ANY  TRANSFER  OF  FUNDS, OTHER THAN THOSE PROCESSED BY AUTOMATED
 CLEARINGHOUSE, MADE BY A FINANCIAL INSTITUTION ON BEHALF OF  A  CONSUMER
 BY  MEANS  OF  A  SERVICE THAT TRANSFERS FUNDS AT EITHER FEDERAL RESERVE
 BANKS OR OTHER DEPOSITORY INSTITUTIONS WHICH ARE NOT DESIGNATED PRIMARI-
 LY TO TRANSFER FUNDS ON BEHALF OF A CONSUMER;
   (C) ANY TRANSACTION THE PRIMARY PURPOSE OF WHICH IS  THE  PURCHASE  OR
 SALE  OF  SECURITIES  OR  COMMODITIES THROUGH A BROKER-DEALER REGISTERED
 WITH OR REGULATED BY THE SECURITIES AND EXCHANGE COMMISSION;
   (D) ANY AUTOMATIC TRANSFER FROM A SAVINGS ACCOUNT TO A DEMAND  DEPOSIT
 ACCOUNT  PURSUANT  TO  AN  AGREEMENT  BETWEEN A CONSUMER AND A FINANCIAL
 INSTITUTION FOR THE PURPOSE OF COVERING AN OVERDRAFT OR  MAINTAINING  AN
 AGREED UPON MINIMUM BALANCE IN THE CONSUMER'S DEMAND DEPOSIT ACCOUNT; OR
   (E)  ANY TRANSFER OF FUNDS WHICH IS INITIATED BY A TELEPHONE CONVERSA-
 TION BETWEEN A CONSUMER AND AN OFFICER OR EMPLOYEE OF A FINANCIAL INSTI-
 TUTION WHICH IS NOT PURSUANT TO A PREARRANGED PLAN AND UNDER WHICH PERI-
 ODIC OR RECURRING TRANSFERS ARE NOT CONTEMPLATED;  AS  DETERMINED  UNDER
 REGULATION OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
   5.  "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.
   6. "TRANSACTION ACCOUNT" MEANS A DEPOSIT OR ACCOUNT ON WHICH THE DEPO-
 SITOR OR ACCOUNT HOLDER IS PERMITTED TO MAKE WITHDRAWALS  BY  NEGOTIABLE
 OR  TRANSFERABLE  INSTRUMENT,  PAYMENT  ORDERS  OF WITHDRAWAL, TELEPHONE
 TRANSFERS, OR OTHER SIMILAR ITEMS FOR THE PURPOSE OF MAKING PAYMENTS  OR
 TRANSFERS  TO  THIRD PERSONS OR OTHERS. SUCH TERM INCLUDES DEMAND DEPOS-
 ITS, NEGOTIABLE ORDER OF WITHDRAWAL ACCOUNTS, SAVING DEPOSITS SUBJECT TO
 AUTOMATIC TRANSFERS, AND SHARE DRAFT ACCOUNTS.
   § 62. RESTRICTIONS ON OVERDRAFT PROTECTION PROGRAMS  OR  SERVICES.  1.
 GENERAL PROVISIONS. 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
 S. 5016                             3

 OR OTHER DEBIT FOR WHICH THERE ARE INSUFFICIENT FUNDS IN THE  CONSUMER'S
 ACCOUNT TO PAY SUCH CHECK OR OTHER DEBIT, UNLESS:
   (A)  THE CONSUMER HAS PROVIDED SPECIFIC WRITTEN CONSENT TO ANY PROGRAM
 OR SERVICE THAT PROVIDES FOR CHARGING SUCH FEES IN CONNECTION  WITH  ANY
 SUCH EXTENSION OF FUNDS;
   (B)  SUCH  FEE IS IMPOSED PURSUANT TO THE TERMS OF A WRITTEN AGREEMENT
 WITH THE CONSUMER WHICH DISCLOSES, IN A CLEAR AND CONSPICUOUS MANNER:
   (I) THE AMOUNT OF ANY FEE IMPOSED IN CONNECTION WITH PAYING  AN  OVER-
 DRAFT;
   (II)  ANY APPLICABLE DISCLOSURE REQUIRED BY THIS ARTICLE IN CONNECTION
 WITH SUCH EXTENSION OF CREDIT;
   (III) THE CATEGORIES OF TRANSACTION 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 TRANS-
 FERS WILL BE COVERED AND A FEE IMPOSED;
   (IV) THE TIME PERIOD BY WHICH THE CONSUMER MUST  REPAY  OR  COVER  ANY
 EXTENSION OF CREDIT IN THE FORM OF PAYMENT OF AN OVERDRAFT;
   (V)  THE CIRCUMSTANCES UNDER WHICH THE INSTITUTION IN WHICH AN ACCOUNT
 IS HELD WILL NOT PAY AN OVERDRAFT; AND
   (VI) OTHER INFORMATION REQUIRED TO BE DISCLOSED BY LAW;
   (C) 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 STATE AND FEDERAL LAW;
   (D) IN NO CASE SHALL OVERDRAFT FEES OVER THE COURSE OF ONE YEAR EXCEED
 ONE HUNDRED  DOLLARS,  INCLUDING  ANY  ADDITIONAL  CHARGES  AND/OR  FEES
 IMPOSED PURSUANT TO THIS SECTION;
   (E)  EVERY  INSTITUTION SHALL ESTABLISH AN AUTOMATIC BOUNCE SYSTEM FOR
 ANY AMOUNT EXCEEDING THE LIMIT  PRESCRIBED  BY  PARAGRAPH  (D)  OF  THIS
 SUBDIVISION.
   2.  MONTHLY  FEE.  ANY INSTITUTION MAY REQUIRE A FEE OF ONE DOLLAR FOR
 ANY CHECKING ACCOUNT FOR THE MAINTENANCE OF AN AUTOMATIC BOUNCE  SYSTEM.
 SUCH FEE MUST BE DISCLOSED PURSUANT TO SUBDIVISION ONE OF THIS SECTION.
   3.  CLARIFICATION  RELATING  TO  OVERDRAFT FEES. IN CASE OF ANY TRANS-
 ACTION ACCOUNT OF A CONSUMER AT ANY INSTITUTION, THE PROHIBITION AGAINST
 AN OVERDRAFT PROTECTION FEE UNDER SUBDIVISION ONE OF THIS SECTION  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.
   4.  PROHIBITION  ON MISREPRESENTATION. IT SHALL BE A VIOLATION OF THIS
 ARTICLE IF ANY INSTITUTION:
   (A) WILL NOT EXTEND FUNDS UNDER  SPECIFIC  CIRCUMSTANCE  TO  COVER  AN
 OVERDRAFT  IN  ANY TRANSACTION ACCOUNT OF A CONSUMER AT THE INSTITUTION;
 OR
   (B) 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.
   § 63. RESTRICTIONS ON ADVERTISING OF OVERDRAFT PROTECTION PROGRAMS  OR
 SERVICES.  1.  GENERAL  PROVISIONS.  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:
   (A)  ANY  REPRESENTATION OR STATEMENT DESCRIBING A TRANSACTION ACCOUNT
 AS FREE OR NO COST IF THE ACCOUNT INCLUDES, OR IS PROMOTED AS INCLUDING,
 S. 5016                             4
 
 OVERDRAFT PROTECTION SERVICES THAT  INVOLVE  THE  PAYMENT  OF  OVERDRAFT
 PROTECTION FEES.
   (B) ANY REPRESENTATION OR STATEMENT ENCOURAGING THE USE OF THE ACCOUNT
 AS  A SERVICE TO MEET SHORT-TERM CREDIT NEEDS OR TO OBTAIN ADVANTAGES ON
 A CONSUMER'S NEXT PAYMENT OF SALARY, WAGES, BENEFITS, OR OTHER INCOME.
   (C) 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.
   2. REGULATIONS. THE BOARD OF GOVERNORS OF THE FEDERAL  RESERVE  SYSTEM
 SHALL  PRESCRIBE  REGULATIONS  IMPLEMENTING THE RESTRICTION SET FORTH IN
 SUBDIVISION ONE OF THIS SECTION 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.
   § 2. This act shall take effect on the one hundred eightieth day after
 it shall have become a law.