Just In- Dodd Seeks Crackdown on Overdraft Fees- Will Impact All
Most consumers think that if they try to use their ATM/Debit Card and there is not enough money in the bank, the transaction will be declined. But with the need for banks to earn more fees, they have turned a negative into a positive. They simply enroll every account holder in overdraft protection. The financial institution lets you spend more than you have( even a dollar), loans you the difference (up to a certain amount) and hits you with a overdraft fee(averages $27). Many banks will not let you easily get out of the service and expect everyone to overdraw their account at least once per year.
On Monday Senator Chris Dodd (D-CT) introduced legislation that would curtail the abusive practices he sees. The bill would set limits to how much banks could collect from an individual customer in fees, banning more than one overdraft fee per month or more than six per year. The fee would also have to be proportional to the cost of processing the overdraft. More detail is required on how this legislation will impact bounced checks. Jean Ann Fox, director of consumer protection at the Consumer Federation of America, just laughed when she was told overdraft protection is a "customer service." She says banks are "taking advantage of customers" by letting them overdraw and then slapping them with "gotcha fees" for each overdraft that’s allowed.
Link Alert : Excellent Resource- Center for Responsible Lending
"That’s not customer service, that’s exploitation," he says. "I should have the right to say I don’t want it."
The FAIR Overdraft Coverage Act will rein in abusive fees, give customers greater choice, and bring greater transparency to these programs. The bill would:
- Require banks to get a customer’s consent before enrolling them in an overdraft protection program for ATM and debit card transactions;
- Limit the number of overdraft coverage fees banks can charge to one per month and six per year;
- Require fees be proportional to the cost of processing the overdraft;
- Stop institutions from manipulating the order in which they post transactions in order to rack up extra fees,
- Require customers be notified when they overdraw their account and be given the option of being notified by email, text or traditional mail; and
- Require that customers be warned if an ATM or branch teller transaction will overdraw their account, and be given the chance to cancel the transaction.
Summary of Dodd’s FAIR Overdraft Coverage Act of 2009
Protecting Customers from Excessive Checking Account Overdraft Fees
Dodd’s Fairness and Accountability in Receiving Overdraft Coverage Act of 2009 reigns in abusive overdraft coverage programs by giving customers choice, transparency, and protection from excessive fees. Below is a summary of the bill.
Gives Customers Real Choice
- Requires Customer Consent for Enrollment: Requires customers opt-in before they can be enrolled in overdraft coverage programs that charge fees for covering ATM withdrawals and debit card transactions.
- Prohibits Discrimination if You Do Not Enroll: Prohibits banks from punishing customers who do not enroll by denying them access to unrelated preferential terms, conditions, or features available to other customers.
Limits Overdraft Coverage Fees
- Limits Number of Fees: Prohibits institutions from charging more than one overdraft coverage fee a month and more than six a year. Institutions can either pay additional overdrafts without fees or reject them.
- Requires Reasonable Fees: Requires fee amounts be proportional to the cost of processing the overdraft.
- Ends Processing Manipulation: Prohibits institutions from manipulating the order in which they post transactions in order to rack up extra fees.
- No Fees for "Holds": Prohibits fees if an overdraft is due solely to a bank hold– such as the hold placed on funds when reserving a hotel – if the hold is greater than the actual amount of the transaction.
- Study Point-of-Sale Transactions: Requires GAO to study the feasibility of warning customers when they use debit cards for purchases that trigger overdraft fees and giving them the chance to cancel the transaction.
Increases Transparency
- Customers Must Be Notified of Overdraft: Requires customers be notified when they overdraw their account and gives the customer the option of choosing to be notified by email, text or a letter.
- Advanced Warning and Opportunity to Cancel: Requires that customers be warned if a transaction at an ATM or branch teller will overdraw their account, and be given the chance to cancel the transaction.
- Show Fees on Statements: Requires periodic statements clearly disclose the amount of overdraft coverage fees charged for the statement period and year-to-date.
- Account Balance Information: Prohibits institutions from including the amount available under an overdraft coverage program as part of the customer’s account balance.
- Disclose Options: Requires institutions to inform customers of the different overdraft services and products they provide, including how terms, fees and products differ.
- Explain Terminated or Suspended Programs: Requires customers be notified, by a medium of their choice, if an overdraft coverage program is terminated or suspended and why.
- Fair Marketing: Prohibits unfair and deceptive marketing practices of overdraft coverage programs and requires clear disclosure of overdraft coverage fees in marketing materials.
Lori Cain, Realtor
Chinowth & Cohen Realtors
phone: 918.852.5036
fax: 866.483.0520
e-mail: lcain@tulsarealtors.com
web: www.LoriCain.com
