Both House Financial Services Chairman Barney Frank with Reps. Carolyn Maloney (D-NY), reform bill sponsor, and key subcommittee chair Luis Gutierrez (D-IL) (their letter to the Fed) as well as Senate Banking Chairman Chris Dodd (D-CT) (his release) have issued warnings to the banks that the next reform battleground may be their use of unfair, deceptive overdraft "protection" schemes to extract penalty fees from consumers. A couple of years back, the Fed led bank regulators in a disgraceful bit of regulatory legerdemain. They declared that even though overdraft protection was in fact a form of loan that should be subject to Truth In Lending warnings, because the banks could make a lot more money if they merely disclosed the practice under the Truth In Savings Act instead, why not just do the latter and let consumers suffer? Previous blog linking to our testimony on the Maloney bill, HR 1456, to reform unfair overdraft practices. In the case of unfair overdraft fees, all the kids are doing it, including pretty much all community banks and even some (too many) member owned credit unions. It is yet another pathetic business model. Consumer release (December 2008) criticizing the Fed. Meanwhile over at the FDIC, a regulator that dares to protect consumers, depositors and taxpayers, a recent study found that what consumer advocates have said about overdraft fees being unfair and targeted at people who could least afford to pay them is true.