Sen. Chris Dodd’s battle against banking overdraft fees continues. He introduced a bill on October 19, covering ATM and debit-card transactions as well as checks. Several other Senators are on board with the reform, as the bill is co-sponsored by Senator Charles Schumer D-NY, Sen. Jack Reed D-RI,who is chairman of the Senate Banking Subcommittee on Securities, Insurance and Investment, as well as Sen. Sherrod Brown, D-OH, and Sen. Jeff Merkley D-OR.
Previously, Senator Dodd called for a bill that would limit the number of overdraft fees a bank could charge as well as allow consumers to opt-in to overdraft programs. This call prompted banks to change overdraft policies, thinking they could appease Congress without having to give up their huge profit-making business model.
On top of huge bonuses paid to executives in the “bailed out” banking industry, credit card fees and interest rates that are skyrocketing, I’m sick of the banks and their dirty little tricks in overdraft manipulation, transaction sorting being just one of them
What’s notable about this bill is it seeks to regulate not just the number but the amount of the overdraft fees, seeking to limit the fees to “reasonable” and “proportional” to the cost of processing the overdraft. I listened to a representative from the banking industry the other day on the Diane Rehm show talking about overdraft fees, and of course, defending them. One of the excuses is given for the outrageous costs is that it costs so much money for a bank to process a bounced check. Hello – isn’t this all computerized? Is there really any decision making done by humans during the process or is this just a computer program. Are there actually any costs at all in processing overdrafts?
The new law would be called the FAIR Overdraft Coverage Act. The major points of the proposed legislation:
- 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.
More details can be found at Sen. Dodd’s website.
Are you in favor of this legislation? Do you think it’s a good way to protect the public or just more government that we don’t need? Tell us by leaving a comment!
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I am in favor of having to tell you if you will overdraft when using an ATM or teller, as well as when using a debit card for POS transaction. But forcing fees to be reasonable is absurd. What is reasonable? How can a restaurant sell me $0.75 of pasta for $15 but a bank can’t have a similar mark-up? I never overdraft and so I never pay a fee. People should stop blaming the banks.
It’s about time that Congress get involved in protecting consumers from unethical banks. Fees ought to be proportional to the cost of processing the overdraft rather than some arbitrary figure that increases their profit margin. Notifying customers that they will overdraft is also necessary.
I commend Senator Dodd for his effort.
Oh, Andrew, I am sorry you lead such a sheltered life. I too, like you, used to defend the banks in thinking it was the always the consumer’s fault. But reality stepped in and show me changing the rules is the right thing to do. Have you ever been, say, poor? Ever have a debit card and checking account? Ever use the debit card for fast food and such? Ever realize that the bank will sort any bounce so the bounce will occur on your fast food (small) stuff and not your gas bill. So they get two or three bounces rather than one! So those coffees end up costing $105!! I’ll admit to the mistake, but hell no to the proportionality!!! And the next step for the poor is say the payday loan to cover the bank charges. And, uh, guess who owns the payday loan?? Banks? you’re right!! so another $25. Um, I try not to make mistakes, but if I scrape a car, I don’t believe I should replace the other guys car if it is just a scratch!
Maybe you do. More power to you!
Although it may be the consumer’s fault for over drafting, it’s completely unfair as to how banks place the order of these transactions. A $3 and $2 transaction were pending for 3 days before they decided to place a later $50 transaction ahead and so i got charged $70 extra. I remember calling Chase and being told, ” Well it’s really when the merchant decides to claim the money, we have no power over it.”
The first time I ever had an overdraft fee, I’d had the same account for many years and never had any problems. I usually had a cushion in my account, just in case I miscalculated tax or change or something, and so the first time it happened (after I’d been laid off for 3 months), I overdrew by a penny. ONE CENT. My bank took out $31 for the overdraft. I called the bank and the customer service rep couldn’t help. I went into the bank and the bank manager informed me that basically, it sucks to be me. I was pissed. When I was employed again, I switched banks, thinking it was just that bank. Unfortunately, that was not the case. The next job I had paid half of what I had been making previously, and my new bank had a $39 overdraft fee! I quickly switched out of that bank. The next bank practiced transition sorting, which I also informed them was a despicable practice (they INSISTED my car payment went through before my Big Mac, even though I bought my fast food lunch 3 days before I paid the car payment), and switched banks again.
I’ve been at the bank I am currently with for a number of years. We never had an overdraft issue until lately. We very closely monitor our account but sometimes we make mistakes, and the worst part? A company I sent a payment to made a mistake. They took out too much money from my account. They admitted the mistake but since I had paid a LOT of bills that same day, my bank ended up taking out ELEVEN overdraft fees (NONE of which would have occurred if not for the company that screwed up). ELEVEN $31 overdraft fees, let me tell you, is $341. Being poor sucks. Being poor and then seeing your account that should have just enough money to put gas in your car to make it to work for the week and it’s instead nearly $1000 in the negative- 3 days before Christmas, no less- now, that’s just cruel. So, Andrew, and others who tell the rest of us not to blame the banks, you can sit high and mighty, judging and blaming the rest of us. I was once like you, and had never overdrafted. It was nice. However, I make mistakes, I have been laid off from my job, unemployed for several months, I’ve had miscommunication (or lack of communication) issues with my spouse about who spent what, and all the other problems people have had that cause overdrafts. I’ll take the blame when it’s my fault, but no matter what, $341 in overdraft fees is ABUSIVE and RIDICULOUS. There is absolultely NO reason for this.
I completely relate to “M.”
Yes, Andrew, you’re clearly a fool if you side with the banking system’s attitude of hiding behind consumer responsibility to create various schemes in order to increase their profit margins.
Andrew, I hope that one day you have to struggle just like the rest of us, the majority of America. Clearly youve never experienced the helpless feeling when youre able to do nothing about 400 dollars in charges because of transaction sorting and you have nothing to live on for 2 weeks and no family to fall back on. Then your paycheck comes and half of it is just spent paying off these absurd fees.
I mean, really. Banking is not as simple as pasta. Sorry to say.. and mind you, if i go to a restaurant and spend 15 dollars on pasta, i probably set that money aside for a couple of days or weeks as part of a plan, and im not paying 15 dollars for the 75 cents of raw ingredients, but for the services of a professional cook and being waited on in a nice atmosphere.
We all know this is pure GREED, why is it they can still get away with this to this day?? When will this bill finally pass?? More importantly, what can we as individuals do to contribute? I recently heard of this motion to reform overdraft policy, and will do anything in my power to support Senator Dodd on this measure. Hopefully individual citizens can still have a voice in the matter. If theres two things that can drive me up a wall, those things are stupid drivers, and overdraft fees.
This legislation is a FANTASTIC idea. I fully support it. I was just screwed by my bank this week. I accidentally went over my balance by $21 and some change, and ended up with $96 in overdraft fees. Then, the manager at the bank had the nerve to tell me that paying the overdraft fees was better than suffering the embarrassment of having my card declined at the store!!! Where is the logic in that?! I would rather not have the items at all than have to pay over 400% more for them! These practices by these banks need to STOP. And I am all for more regulation to achieve it. Most of the people who fall victim to these overdraft charges can’t even afford them on top of all of their other bills in the first place. Like me. This is just one more example of how the middle class and the poor are “under assault,” just like President Obama said. God bless President Obama, and I hope all the fat cat bankers, big businesses, predatory lenders, and crooked Republicans all find themselves in Hell where they belong for ripping off the American people so shamelessly.
I’ve read all of the comments and I agree with those who have had to deal with the stress of overdraft fees, when you don’t see it comming. But heres another problem that no has mentioned, lets say you are made aware of the overdraft after 10:00a.m. and you go to the bank to pay the fees, if it is after 10:00a.m. you may be hit with another overdraft fee because the banks computer will not show you have paid the overdraft fee, so now you have to go back to the bank when they first open. I would love to have a peice of that action, think about it.