Fed Acts to Stop Surprise Overdraft Fees

Banks Need Customers' Consent before Charging Large Overdraft Fees, According to New Rule

(AP)  Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced Thursday by the Federal Reserve.

The rule responds to complaints from consumer groups, members of Congress and other regulators that the overdraft fees are unfair because many people assume they can't spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.

For small purchases, such as a cup of coffee, the penalty can far exceed the actual cost of the transaction.

Under the Fed's new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don't "opt in," any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.

Many consumers do want checks and regular electronic bill payments to be covered in the event of an overdraft, Fed officials said. As a result, those transactions aren't covered by the rule.

Banks earn as much as $25 billion to $38 billion annually from overdraft fees, Fed officials said, but that total includes check overdrafts.

Many larger banks, including Bank of America Corp., JPMorgan Chase & Co., U.S. Bank and Wells Fargo & Co. began instituting similar "opt-in" plans in late September after coming under fire for the fees.

But consumer groups and other regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair, said new rules were still necessary to ensure smaller banks followed suit.

Many lawmakers have criticized the Fed for failing to provide sufficient consumer protection in the past, a defect they say contributed to last year's financial crisis. Sen. Christopher J. Dodd, D-Conn., on Tuesday introduced a bill that would strip the Fed of its consumer oversight.

Dodd also proposed legislation last month that would have imposed limits similar to the Fed's on the banks' ability to charge overdraft fees.

[kimmie404]

I don't see how the bank is "screwing" their customers. It's very simple...don't spend more than you have in the bank...keep track of what you have. It's available in statements and On-Line. I don't get why banks have to be responsible for CUSTOMER irresponsibility.

If you don't bounce checks or try to overcharge your debit card you won't get penalized with an overdraft fee.

[themooniac]

please, Brassavola and really everyone, send me your "worthless" $2.00 bills...

[I_am_me1953]

Don't have any $2.00 bills to send you, but I can sned a few $12.00 bills if you can make the change for them.

[SAMTORRES66]

ALELUYA.....ABOUT TIME SOMEONE PUTS AND END TO THIS RIP-OFF

[afmcalax]

WOW ... the rule takes affect July 1st ... a whole 7 1/2 months from now. More than enough time for the banks to continue to screw their customers. Why can't Congress and the Fed realize that these new regulations need to be made retro-active or take affect within a month. This is another fake regulation to pretend like they are helping us while the bankers meet in the back room and laugh their arses off about our stupidity.

[darce3216]

Cattle-ya

A $2.00 bill is worth $2.00. A $3.00 bill is worthless.

v8

[Stevenapoli7]

The Federal Reserve Bank. What a misnomer. It is not run by the federal government, it is a bunch of rich bankers. It isn't really a bank, and certainly has no reserves of any kind.

[Stevenapoli7]

Yeah, and the Fed should ask our permission before diluting our savings by adding trillions to the money supply. How hypocritical.

[brassavola]

Well, well, well!!!!
Oh the new surprise overdraft fees imposed
by Congress, does not take effect until July 1, 2010.
WOW......My Congress is on the take.
The US has the BEST POLITICIANS that money can buy.
Here is the article.

http://www.cbsnews.com/stories/2009/11/12/business/main5629680.shtml?tag=cbsnewsSectionContent.8

Vote your Congress person only one term.
They are as worthless as a $2.00 bill.
We have nothing to lose, because Congress has
already screwed us along with the financial
industry.

Cattle-ya