Fed cracks down on overdraft fees

Fed cracks down on overdraft fees

money.cnn.com

WASHINGTON (CNNMoney.com) -- The Federal Reserve on Thursday released a new rule to prohibit banks from automatically enrolling customers in overdraft protection programs, which charge fees when consumers spend more than they have.

Starting on July 1, 2010, all banks will have to ask their customers to opt in to overdraft protection plans for ATM and most debit card transactions.

Some banks charge as much as $39 when customers overdraw their bank account by even a few dollars.

"The final overdraft rules represent an important step forward in consumer protection," Fed Chairman Ben Be

(visit the link for the full news article)

Have you ever overdrawn your bank account by a few dollars? If there's a lapse of a few days before you check your balance you find that one overdraft has led to another, which has led to another, etc. until you're owing a few hundred in fees which, when they are deducted, lead to another spate of overdrafts.

That $30-plus charge is multiplied many times over.

And all because of a $2.00 overdraft.

We've always known that this is unfair, but, like account fees that go up the less you have in the bank, there didn't seem much we could do about it.

Hopefully, this will at least give us the choice of enrolling in an overdraft protection service or not.

The best solution, of course, is to lower or eliminate overdraft fees altogether.

money.cnn.com
(visit the link for the full news article)

Granted it's a total rip to get charged $30 for overdrafting a buck an hour or so before your direct deposit goes through but you knew the deal when you signed up. It's not like a thinking human being is going to go around willy nilly signing every document in front of them.

Besides, what happens during an overdraft is you're technically stealing from the bank. The next person who freaks because they couldnt balance their checkbook or couldnt bother to save even $10 as a buffer and incurs an overdraft penalty should be brought up on theft and fraud charges.

I've had my share of overdraft fees. Even had an ATM card get sucked in and eaten by a machine once. I deserved it. I was an awful person when it came to money and priorities. Learning takes time and plenty of penalties.

The only reason the fed cares is because the bank is grabbing at money the fed wants. The fed hates the competition.

More atrocious is the city that tows your car illegally, refuses to refund the fine, causes you to miss work, maybe get fired from your job, causes you to miss rent because you dont have a job, and puts you out on the street. All without even apologizing after it becomes statewide news that your car and dozens of others were towed illegally. Then they all get re-elected.

Now which one is more a monster? The bank for penalizing your screw up or the city for setting your life back two years because it needed the revenue and didnt care how it got it? The city will send their cops with their guns to collect what they arbitrarily decide you owe. Last I knew a bank didnt have any guns or prisons or the ability to kick in your door at 3AM with impunity.

[edit on 12-11-2009 by thisguyrighthere]

I've over-drafted by only a few cents because of a check not going through their computers on time and been fined $25. Then another transaction went through that was made days earlier, and guess what? Further into the negative and another $25 charge.


The way I see it, that's $50 in the hole for me just because they can't get do their job properly.

A check not being processed by computers within a certain amount of time is not my problem. It's THEIR problem, because it's THEIR job and THEIR machines.

The whole banking system is completely arrogant and asinine. Banks are more dangerous to nations than standing armies. How true, how true...

My little brother deposited his paycheck form work one day a few weeks ago. He has a shared acount with his father as well as his own account. he told the lady to put it in his account but did not put the account number down as he always goes to that bank. Stupid on his part, and I have told him as such. Either way, the check was put in his joint account and when he went a bought groceries for his apartment he overdrew and it was several small transactions from several stores(he always goes to four markets for the different sales and deals) for what would have been maybe twenty dollars he was charged nearly four hundred in late fees. The bank told him that even tho they knew it was the tellers fault cause she put it in the wrong account, he still had to pay the difference. at minimum wage and only ten hours a week, he is still paying for the banks mistake(tho as i have told him on many occasions that as a responsible adult it is his job to mak sure that things are done properly)

This will just end up hurting responsible customers. No overdraft fees will mark and end to free checking accounts. This legislation is simply another redistribution effort.

My father deposited several large checks and a couple of days later he started writing checks. Several days later the bank called and told him that he had written some checks that had bounced. He told them that he knew he had enough money because he had put over $20,000 in a couple of weeks before. That's when they told him that those checks weren't good. They should have called him and told him that the deposited checks were not good. Just their way of making money from these charges.


I deposited a check in the bank and later that day I wrote a check. It bounced and I was charged late fees.

reply to post by stevegmu


I cannot see how lowering or eliminating overdraft fees would affect whether checking is free or not.

Generally speaking, those who have a lot of money in a particular bank get free checking. The less the customer has, the higher the account charges. Just a way of squeezing more out of the less advantaged I guess. But I don't see how revenues gained from outrageous overdraft charges are tied to account fees, other than banks may raise them to regain the revenues lost on overdrafts. In other words, pure greed.

I think banks need to charge SOMETHING for overdrafts, otherwise people would get careless or dishonest and bounce checks all the time. It is the unreasonably high fees that are the issue for me.

reply to post by thisguyrighthere


A little biased yes...but true.

All I am going to say is that the world is a business. Churches, government, cities, you name it.

reply to post by MBF


It's true the bank usually doesn't tell you you have an overdraft unless you go online everyday and check.

I think a deposited check takes a few days to clear, so you need to wait awhile after depositing.

But yes, IMO the bank really wants the money from the overdraft charge. That's pure profit.

Thank God and it's about time!

Chase charges $35 bucks and they purposely manipulate accounts to get it! Last month, they charged my $10 service fee when I didn't have enough in the account - guess what? Yup, $35 bucks. When my deposit went through, I wasn't yet aware of the $35 "Overdraft" which led to 10 - yes, TEN more overdraft charges!!! The largest overdraft was for a purchase for an amount of $3.17!!! When I called to have them reverse all of the charges they told me that there was nothing they could do about! After nearly $400 dollars in over-draft charges, I had to forgo paying several bills. The beauty of it... the one bill I haven't paid is THEIR credit card bill!!! When they call me about it, I explain that they already took the money 3 times over!

The problem I have with overdraft fees is that the banking industry actually counts on it. It is all a part of their money-making structure.

Hell, this year they are forecasting 35 billion, with a B, in overdraft charges coming back to their coffers.

That is a markup from 19 billion last year!

It is about time that this was reigned into control.

reply to post by Sestias

Originally posted by Sestias
Hopefully, this will at least give us the choice of enrolling in an overdraft protection service or not.

Oh, this will give you a choice alright, but in the end this will just hurt the very same consumers even more.

How, do you ask?

By eliminating the one motivation banks had to not report such minor overdrafts to consumer reporting agencies ( like this one ), merchants will now routinely deny consumers with any overdraft history the ability to tender payment by check. Additionally, in the case of a bounced check, now the merchant's 'bounced check' fees get to kick in....and the collection fees... When it's all over, a simple overdraft could cost a consumer hundreds of dollars.

Out of the pan and into the fire.

Still think it was a beneficial move for consumers?

Originally posted by Sestias
The best solution, of course, is to lower or eliminate overdraft fees altogether.

No. The best solution is not to bounce checks.

There used to be a time when consumers were disciplined enough that bouncing a check was unthinkable.

That kind of personal financial responsibility seems to have vanished.




[edit on 13-11-2009 by loam]

The UK started a few years ago- with the government taking the banks to court of illegal bank charges - well that case is nearly finished (and appeals and everything) with the outcome to be that banks have to issue refunds as charging £20 per item is excessive.


so now banks charge interest per day overdrawn instead.

but for some people , they will get thousands in refunds.

reply to post by loam


I understand your point, and it is a good point.
However, it isn't always as cut and dry as you present it. The fees that the banks use on overdrafted accounts are downright predatory at times.

An overdraft can very easily add up to hundreds of dollars as it stands right now.
Of course, a sure way around all of the mess is to not overdraft your account, but a bank shouldn't be allowed to charge you 5 separate fees for the same mistake.

Maybe this is like everything else in American Society today and the best answer is somewhere in the grey area between where we are and what the expect to do about it?

reply to post by JayinAR

Originally posted by JayinAR
I understand your point, and it is a good point.
However, it isn't always as cut and dry as you present it. The fees that the banks use on overdrafted accounts are downright predatory at times.

An overdraft can very easily add up to hundreds of dollars as it stands right now.

Ok.

But you didn't eliminate the expense. As I've already mentioned, it will likely now cost a consumer even more. Not to mention the loss of check writing ability, because no merchant will accept checks from you anymore.

Trust me, the merchants are dancing in their corporate offices over this one.



[edit on 13-11-2009 by loam]

reply to post by loam


Nobody's talking about relinquishing "personal responsibility" (the term of the year).

There should be distinctions made between overdrawing by accident -- say a dollar or two -- or overdrawing by hundreds (probably not an accident).

Of course there should be incentives for responsible use of one's bank account, and I'm not opposed to a reasonable fee.

But paying hundreds of dollars for a #3.50 error is going overboard. There is no way that $3.50 is going to inconvenience the bank that much or cost it anywhere near the amount they're charging for what is usually a mistake.

And of course, it's the little guy -- the one who because of necessity has to draw out almost all of his account balance every month -- who ends up paying through the nose. People with thousands in multiple accounts usually don't have to draw down their accounts to near zero so they don't often run the risk of overdrafts.

The less one has the more one has to pay for everything.







[edit on 13-11-2009 by Sestias]

Originally posted by stevegmu
This will just end up hurting responsible customers. No overdraft fees will mark and end to free checking accounts. This legislation is simply another redistribution effort.

amazing. This, in no way shape or form, is going to hurt anyone.

And its not just irresponsible people who accidentally over draft. Please don't make such childish comparisons.

I've been charged over drafts because the bank put my deposit into someone elses account. The fat teller fat fingered the keyboard and got the digits wrong, but since the XXXXXX32 matched someone elses account who also had XXXXXX32 - it appeared to be okay on my end, and as far as my records were concerned.


Yes, i got my $$ back and ended up not having to pay the fee's, but it took 8 days, constant communication, and several late-fee's on unpaid bills until it was all resolved.

Did the bank reimburse me for the late fee's on my mastercard for a late payment that got declined because ther ewas no money in my account?

NO
Please, do us all a favor, and think before you speak...(or in this case....type)

[edit on 13-11-2009 by Snarf]

No offense intended, but you guys have this one totally wrong.

Ask anyone who remembers how it was 30 or more years ago. Then tell me which option will hurt the consumer least.