Overdraft fees, loan practices targeted

For instance, State Senator Steven Baddour, a Democrat from Methuen, has filed a bill to require institutions that mail unsolicited loan offers - such as the checks sent out by many credit card companies - to comply with a set of conditions. The companies would be required to allow consumers to return the loan proceeds within 10 days at no cost, and not hold them liable if someone forges a signature to cash in on the loan.

Companies would have to include a prominent warning that the checks constitute a loan that must be repaid, explain the terms of the loan in plain English, and let consumers opt out of receiving future solicitations.

Democratic state senators Michael W. Morrissey of Quincy and William N. Brownsberger of Belmont both submitted bills related to bank overdraft fees.

Morrissey wants to bar banks from charging an overdraft fee that is larger than the administrative costs of covering the debit. He also wants banks to warn customers of a looming overdraft fee before letting them make an ATM withdrawal or payment that would overdraw their accounts.

Brownsberger’s bill would prevent banks from charging customers multiple overdraft fees on the same day and require banks to notify customers within an hour that an account is overdrawn, via e-mail or cellphone, to give them a chance to correct the problem. And it would let customers opt out of overdraft protection plans, so banks would simply reject transactions when accounts do not have enough money, instead of honoring the charge and then hitting customers with overdraft fees.

A number of banks, including Bank of America, Wells Fargo, JP Morgan Chase, and TD Bank, plan to change their overdraft policies to address complaints by consumer groups, regulators, and lawmakers.

In addition, Congress and the Federal Reserve have proposed rules to restrict overdraft fees.

Senator Brian A. Joyce, a Milton Democrat, wants the state to license and regulate home loan officers who handle reverse mortgages - an increasingly popular way for seniors to cash in some of the equity in their homes without being forced to move. Loan officers must already obtain a more general mortgage origination license, but Joyce wants those who sell reverse mortgages to be subject to more specific regulations that would be developed by the state.

The bills are scheduled to be heard today at 1 p.m. by the Joint Committee on Financial Services in Room A2 of the State House.

Representative Peter J. Koutoujian, a Waltham Democrat who co-chairs the committee, said lawmakers have heard complaints from children of seniors who feel their parents were misled by brokers selling reverse mortgages.

“We need to address ways to strengthen the law to protect people from predatory lenders,’’ he said.

In addition, Koutoujian said, lawmakers are trying to determine whether additional regulations are needed to cover unsolicited loans, or whether the Legislature should simply ban certain types of the loans.

But Koutoujian said he doubted lawmakers could do much on overdraft fees, because the rules would only apply to state-charted banks and not to federally chartered banks, such as Bank of America and Citizens Bank, which account for more than half of the branches in Massachusetts. US law largely bars states from regulating national banks.

“No one hates overdraft fees more than I do,’’ Koutoujian said. But Koutijian said it is unfair to enact overdraft rules that would apply only to state-chartered institutions and put local banks “at a competitive disadvantage.’’

That’s one reason why the Massachusetts Bankers Association, which represents state-charted banks, opposes the overdraft measures. The group, however, does support protecting consumers from problems related to unsolicited loan offers.

“We’re generally supportive, because we think there have been some instances where abuses have occurred,’’ said Kevin Kiley, the association’s executive vice president.

He noted that such offers have become less common over the past year, as lenders grew more reluctant to extend credit.

Barbara Anthony, undersecretary of the Massachusetts Office of Consumer Affairs and Business Regulation, said stronger rules are needed to protect residents from problems with reverse mortgages, unsolicited loans, and overdraft fees.

For example, Anthony said, consumers should be able to opt out of overdraft programs.

And she said banning some types of unsolicited loans “may not be a bad idea.’’

“These loans can be very problematic,’’ she said. But Anthony, who plans to testify at today’s hearing, declined to comment on specific bills.

The Massachusetts Mortgage Association, which represents mortgage companies, did not respond to a request seeking comment.

Todd Wallack can be reached at twallack@globe.com.