In recent years, most banks started approving, rather than declining, debit and check transactions that exceeded what customers had in their accounts. The banks’ rationale: consumers would rather pay $39-a-pop bounce fees, banks contend, than risk embarrassment at the checkout counter. I don’t know about you, but I would rather have my card declined.
We’ve written about overdraft fees before, the latest article being “Overdraft Fee Legislation Gaining Momentum“.
Recently, the Fed issued new policy guidelines regarding overdraft fees. The policy requires customers to opt in to “overdraft protection” programs. The overdraft protection program means customers agree to pay a fee any time they overdraw their accounts at automated-teller machines or using a debit card. In a pro-active move, the Fed prohibited banks from charging higher fees to customers who don’t want overdraft protection.
Members of Congress have not halted their efforts to introduce legislation to take overdraft consumer protections one step further. Why? The Fed move is good, but isn’t enough, because:
- It doesn’t cover check or recurring-debit transactions
- It doesn’t cap the amount or number of fees that can be charged
- It doesn’t prevent banks from manipulating how they process transactions to increase fee income
As we’ve mentioned in our other posts, the banks are highly resistant to losing the “option” of charging overdraft fees, as they are such a huge profit center. Michael Moebs, an economist and chief executive of Lake Bluff, Ill.-based Moebs $ervices, said the new Fed policy will cost banks on average a minimum of $5 per checking account. For the U.S. banking system, he predicts a cost of about $600 million, or 2% of the estimated $38.5 billion in consumer overdraft revenue.
The new rules go into effect July 1.
Sources:
Wall Street Journal Online
Ask Liz Weston
Related posts:
- “Transaction Sorting” Maximizes Overdraft Fees for Banks With the new credit card laws about to go into...
- Overdraft Fee Legislation Gaining Momentum Sen. Chris Dodd’s battle against banking overdraft fees continues. He...
- Consumer Takes Bank to Small Claims over Overdraft Fees – and Wins! I thought I would share with you a great video...
- Banks Rethink Overdraft Fees We’ve written about overdraft banking fees before, and they way...
- PrePaid Debit Card Costs vs. Overdraft Fees – Which is Worse? Charges for calls to customer support, reloading fees, fees for...
No Comments so far ↓
There are no comments yet...Kick things off by filling out the form below.