All that talk in Washington about holding banks accountable for hefty overdraft fees is finally turning to action.

Last week, Sen. Christopher Dodd, the Senate Banking Committee Chairman, proposed tough new legislation that goes way beyond what banks like Chase (Stock Quote: JPM), Citi (Stock Quote: C) and Bank of America (Stock Quote: BAC) have already promised to do about cutting overdraft fees. Here’s the brand new proposal, and what it means for banks and customers.

While Washington has been whispering for weeks about new bank consumer protection rules, up until now nobody has put any numbers or specifics on the table. The Dodd bill does so by pinning down banks on the number of times overdraft fees can be levied as well as taking dead aim at the size of the overdraft fees.

Congress isn’t happy with banks these days. Many financial institutions were bailed out by taxpayers, only to turn around and raise consumer overdraft fees — or, as the banks called them, overdraft protection programs.

Particularly irksome to consumers is the way that banks prioritize overdraft penalties. Banks can make more cash by green-lighting larger checking account withdrawals first, thereby draining bank accounts and leaving less money to cover other purchases. By law, banks don’t have to let customers know that their accounts are overdrawn. Bank consumers don’t realize it until they check the account and see the dreaded minus sign to the left of their account balance, along with both the checking account overdraws and the accompanying fee deductions.