New rules proposed in Congress for overdraft charges
Filed under: Banks
Earlier today, Senators Chris Dodd, Jack Reed, Charles Schumer and Sherrod Brown unveiled a long awaited bill that will, if enacted, make it harder for banks to lob overdraft fees at their customers.If the Fairness and Accountability in Receiving (FAIR) Overdraft Coverage act passes, it will do many things, including:
- require banks to warn customers if a withdrawal made at an ATM or bank branch will overdraw their account.
- keeping banks from processing debits to make it likely that more transactions will incur "bounce" fees
- require overdraft fees to be in proportion to the bank's costs in processing them
- forbid banks from automatically enrolling customers in overdraft programs without their permission
- prohibit banks from including overdraft protection in a statement of the customer's available balance
- limit the number of overdraft fees that banks can charge from one per month to six per year
Whatever you think of overdraft protection -- that it's needed or not -- it's clear that banks are making a mint from these fees. Brown, a Democratic Senator from Ohio, said that the Buckeye State alone paid nearly $900 million in overdraft charges last year. I've made this comment in a WalletPop post before, but I can't help seeing the potential overdraft fees savings of 2010 as a much-needed jolt to the economy.
If Moebs Services, the research company, is right about its often-quoted $38.5 billion that will be spent on overdraft charges this year alone ... well, just think where that $38.5 billion might be spent next year -- at restaurants, shopping malls, grocery stores, put into savings accounts ...
So it'll be interesting to see where this all goes. For now, this is just pending legislation, but with a Democratic-controlled Congress and a Democratic president, it seems likely that overdraft charges are going to become near extinct, which, of course, begs the question: What on Earth will the banks come up with to replace them?
Reader Comments (Page 1 of 1)
10-19-2009 @ 7:51PM
Kristin said...
This story really bugs me. For one, I work at a bank and I have worked for 4 different banks over 23 years. In that time I have been living of the understanding that if I get an overdraft, I could be fired. Because of this, I check my account on-line or by telephone to make sure that this doesn't happen. If I have to live by this rule as an employee, I know it is not impossible to do. From experience I can say that most small banks do forgive customers an occasional overdraft. ESPECIALLY if it is a small one, we don't charge. We also call our customers to let them know they are overdrawn if they are not in the habit of doing it all the time. These new rules seem to be geared towards people who don't balance their checkbooks and don't care.
Reply
10-20-2009 @ 8:41AM
JOC said...
Why is wrong for a bank to make money? Why does the gov't have to have a say so in bank operations? Why are we still, after the "crisis", encouraging bad behavior and punishing the free market?
10-20-2009 @ 8:50AM
walkerhds said...
or targeting banks who process debits to the account in a largest to smallest order to maximize their chance of overdraft fees, and then post the credits like a deposit afterward. (and in an era where supposedly the validity of a check can be known within minutes, a hold being placed on deposits for 24-72 hours as is the practice of some banks, is ridiculous.)
The average consumer, thinks of it as "this pile of money". "I take money out, I put money in, at the end of the day, I should have x left in the pile. They aren't thinking strategically, and banks count on their ability to manipulate the order of processing with that in mind.
This bill looks (at least based on the writer's description) a bit more consumer-friendly than most banks have been. (and perhaps it is time to remember that the money on deposit isn't the bank's, it's the customers' as well.)
Reply
10-20-2009 @ 1:18PM
GiftCardRescue said...
This will completely save my financial life. I cannot even explain how much money I have lost to BB&T due to their $35 overdraft fees. Finally some good work done by congress that I can be proud of. Anyway to help me save some money can only help.
Ben @ http://giftcardrescue.com
Reply
11-13-2009 @ 11:11AM
joann said...
this needs to be done as i used to bank with citizens and they purposely hold transactions and put them in the order of largest to smallest and then charge fees on each item that is overdrawn. I have been charged 200 in fees because of this practice and it has happened more than once. It is unfair when you expect 1 bounced check fee not 5 because of what they are allowed to do....go congress the banks have been ripping the consumer off for years...
Reply