Should banks reimburse for overdraft fees?

It's a question that I never would have thought posing if it weren't for England's Prime Minister Gordon Brown.

He recently told the banks in England that he believes billions of pounds should be refunded to customers who were swindled out of their money by overdraft charges.

That got my attention, and so I've spent the last hour or so reading a lot of British newspapers online. Brown offered his opinion because the governmental department, the Office of Fair Trading (OFT) has concluded that the fees have been punitive, unfair and wrong.

That wound up bringing up a lawsuit, and the Supreme Court in England is currently weighing whether the OFT can determine if the bank charges are fair.

In a letter making his case for refunds, Brown stated, in part: "People need to have the confidence that, when they open an account, they will be treated fairly, charges and fees will be transparent and reasonable and that savings will be safe."

According to The Daily Mail, as much as $4 billion, and charges as old as the year 2001, could be refunded.



So that got me thinking about things over on this side of the pond. As we've recently written about, several of the biggest banks in America have finally declared that they're going to limit the number of overdrafts they give customers in a given day, and several have said that if you go into overdraft by $5 or even $10, there will be no fee.

Now, I know I'm dreaming, and I'm just having some fun thinking about the idea, but it does make me wonder what would happen if the same sort of scenario could happen here. For instance, legislators in Washington, D.C., have been proposing a new consumer agency that would write and enforce rules protecting the public in financial transactions. If some of these overdraft fees were deemed illegal, could we have a situation where people are reimbursed for fees in the last several years?

It's difficult to imagine something like that happening, although clearly, it's that type of nightmare scenario (for the banks) that makes them want to be free and clear from being regulated by a government agency (and explains why the sudden change of heart among Bank of America and Chase, which then inspired other banks like Wells Fargo and U.S. Bank to follow suit).

In any case, I think there's a good argument for American politicians and the public to start demanding refunds for the public (and, granted, that's a self-serving idea, since I've paid for more overdraft fees than I care to consider). After all, the taxpayers bailed out the banks last fall, so arguably, those overdraft fees really are the public's money.

The Wall Street Journal just reported that banks are on track to "book a record $43.6 billion in fees charges to customer deposit accounts -- most notably overdraft fees -- just as federal lawmakers prepare fresh restrictions on such fees."

And what would stimulate the economy more than millions of Americans receiving billions of dollars in bank refunds?