Why HB 1553 will harm — not help — Pennsylvania consumers

Have you ever faced an unexpected bill — rent, a utility payment, or groceries — only to discover your account balance couldn’t cover it? For millions of Pennsylvanians, overdraft protection provides a vital financial safety net in moments like these. 

HB 1553, a bill now moving through the Pennsylvania House of Representatives, threatens to eliminate that option. This will force consumers toward more dangerous financial alternatives and stripping them of choice in how they manage their money. 

While intended to protect consumers, this legislation would have the opposite effect. It will limit access to safe, transparent overdraft programs, disproportionately harm low- and moderate-income Pennsylvanians, and undermine the viability of community financial institutions across the state. 

Protecting Consumer Choice & Financial Flexibility

Overdraft services are opt-in and voluntary — they exist to give consumers choice and flexibility in managing their finances. According to a 2023 national survey, 89 percent of consumers find overdraft protection valuable, especially when it helps cover critical expenses like rent, groceries, or medical bills. 

Pennsylvania’s credit unions and banks prioritize transparency and clear communication. Members and customers fully understand their accounts’ terms, including any fees, and choose whether to opt in to overdraft services. There are no surprises. Consumers retain full control and can opt out at any time.

Stripping away this choice will not eliminate financial need, it will simply force consumers to turn to higher-risk, unregulated options like payday loans or other predatory products and services. A 2016 Pew Charitable Trusts report found that 12 million Americans annually resort to payday loans, often due to lack of safer alternatives, and get trapped in cycles of debt due to the exorbitant fees. 

Unintended Consequences and Operational Reality

HB 1553 imposes arbitrary fee caps and complex same-day notification requirements that are operationally unworkable, particularly for small credit unions and community banks.

These requirements would significantly hinder credit unions’ and banks’ ability to recover the actual costs of administering protective services like overdraft coverage. If enacted, many institutions may be forced to eliminate free checking accounts; raise fees elsewhere to cover the new compliance burdens; or end overdraft programs entirely, removing a valued option for members and customers. 

None of these outcomes are in the best interest of Pennsylvania consumers.

Federal Preemption & Charter Impact

Adding further inequity, HB 1553’s restrictions would not apply to national banks, which are exempt under federal preemption. This leaves state-chartered institutions and their customers bearing the full brunt of the bill’s consequences.

Many state-chartered institutions may be forced to consider switching to federal charters to avoid these burdens, reducing regulatory oversight at the state level and shrinking consumer choice in Pennsylvania.

This is not speculation. During recent legislative discussions, even bill supporters acknowledged federal preemption would take hold, but dismissed the likelihood of charter flipping — a risky gamble with real-world implications for Pennsylvania’s financial system.

A Better Path: Financial Literacy & Consumer Empowerment

Rather than restricting safe, regulated financial tools, policymakers should focus on enhancing financial education and consumer empowerment.

Pennsylvania’s credit unions and banks are deeply committed to helping consumers build financial capability. Our institutions offer robust financial education programs and work every day to ensure consumers can manage their finances effectively and confidently.

Eliminating valuable services like overdraft protection undermines these efforts and leaves consumers with fewer, not better, options.

HB 1553 is well-intentioned but poorly conceived. It risks unintended harm to the very consumers it aims to help, while weakening Pennsylvania’s financial institutions.

We urge lawmakers to reject HB 1553. Let’s pursue solutions that truly promote consumer choice, financial capability, and a strong community financial system—not rushed legislation that will harm Pennsylvania families.