Senate Banking Committee Chairman Chris Dodd (D-CT) unveiled The Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act, a bill to protect Americans from excessive checking account overdraft fees.

The FAIR Overdraft Coverage Act will rein in abusive fees, give customers greater choice, and bring greater transparency to these programs. The bill would:

* Require banks to get a customer’s consent before enrolling them in an overdraft protection program for ATM and debit card transactions;

* Limit the number of overdraft coverage fees banks can charge to one per month and six per year;

* Require fees be proportional to the cost of processing the overdraft;

* Stop institutions from manipulating the order in which they post transactions in order to rack up extra fees;

* Require customers be notified when they overdraw their account and be given the option of being notified by email, text or traditional mail; and

* Require that customers be warned if an ATM or branch teller transaction will overdraw their account, and be given the chance to cancel the transaction.

While this new bill is bound to cut into bank revenue, bankers are already trying to think ahead and find ways to overcome the shortfall. Over in the Retail Banking Network group on LinkedIn, there is an interesting discussion on how to reconfigure a bank’s overdraft and NSF programs for the new compliance reality. Here are some of the stronger ideas:

> Mark Sackett, deposit product manager at First Merchants Corp., suggested that bank should give customers the ability to “opt-out” of current overdraft (OD) policies that would authorize a debit card transaction over the amount in the customer’s account.

> Steve Alexander, who described himself as an “experienced banking professional,” wrote that banks should extend the time allotted to customers for making a deposit to cover the overdraft and avoid charges. He thought doing so would “reestablish the good will and trust of the customers.”

> Mike Branton, owner, StrategyCorps, suggests that debit card usage and interchange fees offer the best revenue alternatives for banks. Branton thinks there there are opportunities to “reward customers for swiping their debit cards more — and not points-based programs redeemable for valuable merchandise; these program’s performance are spotty at best.”