Subscribe Feed (RSS)The Center for Responsible Lending (CRL), a nonprofit, nonpartisan research and policy organization, says that bank overdraft fees have surged by 35% over the past two years, costing Americans nearly $24 billion in 2008 alone. As many as 51 million Americans are affected annually at an average cost of $34 per overdraft.
Protecting Family Wealth
The Durham, NC organization whose mission is defined as, “protecting homeownership and family wealth by working to eliminate abusive financial practices,” says that overdraft fees are adversely affecting families who are already financially pressed due to the most recent recession and its aftermath.
“Banks and credit unions have become so sophisticated in driving up overdrafts that Americans now pay more in overdraft fees every year than they do for books, cereal, or fresh vegetables,” said CRL senior researcher Leslie Parrish. “These billions of dollars drained from consumers each year represent lost opportunities for families to save for a rainy day or buy necessary goods and services that could help spark the economy.”
Small Debit Transactions
According to the CRL, small debit transactions are the usual trigger which bring about overdraft charges. Most of these could be avoided if these transactions were denied in the first place, instead of approved and resulting in overdraft charges.
A handful of banks have attempted to amend their overdraft policies, but the CRL contends that they aren’t going far enough and have asked policymakers to do the following:
- Require that institutions deny debit card purchases and ATM withdrawals, without charge, if the funds aren’t there. As a limited exception, an overdraft fee could be charged if the lender gives the customer a real-time warning and chance to decline.
- Require that overdraft fees bear some relationship to a lender’s cost of covering a shortfall.
- Limit the number of fees that can be charged to a customer during a year before the institution must enroll the customer in a reasonably priced overdraft product, such as a line of credit, if it wants to keep charging for overdrafts.
- Consolidate and streamline existing federal consumer protection authority by housing it in one organization: the proposed Consumer Financial Protection Agency, which would focus solely on what’s in the best interest of consumers.
As mentioned, most banks allow customers to enroll for overdraft protection which greatly reduces the fees for overdrafts. Funds are typically withdrawn from a related credit card or savings account, but those costs are much lower than an overdrawn checking account and the resultant fees.
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Tags: bank fees, banks, Center for Responsible Lending, consumers, overdraft fees, overdraft protection
How can you find free checking? And who is eligible for a no fee direct deposit account? These questions and others are answered as we take a look at banks which let you get free checking with or without strings attached:
There isn’t enough space in this article to cover all fifty states and what laws may affect you, but on the federal level we can take a look at a number of laws on the books designed to protect the American consumer. As far as state and local laws go, check your city and state’s websites for consumer information pertinent to you.
Many banks on the other hand have received billions of dollars of taxpayer money thanks to various bail out initiatives started under the Bush administration and continuing with President Obama. Consumer activists have have suggested that people are getting stuck both ways – by bailing out the banks and then paying for the bail out through increased fees and bank charges.
