Last week, Federal Reserve rules went into effect that barred banks from automatically charging existing account holders overdraft fees on ATM and debit card transactions.
But more consumer protections concerning overdrafts could be on the way.
"American families, especially those most vulnerable financially, could save millions of dollars a year in costly overdraft fees if guidelines the
"The guidelines would encourage the banks the
Unlike the new Fed rules on ATM and debit card transactions, the proposed
Two aspects of current overdraft policies concern the
But contrary to prudent bank practice, such transactions are not evaluated and approved based on bank lending standards. They could put bank deposits in jeopardy, Thompson said.
"We want to make sure that when a person goes into a bank, they know their money is safe," she said. "Our mission is primarily public confidence."
Second, there's a perception issue. If people believe banks habitually trick them out of money through sneaky fees, it undermines confidence in the entire banking system, Thompson said.
-- Review the marketing and disclosure of their overdraft programs to minimize potential customer confusion.
-- Train bank tellers and customer service representatives to explain overdraft program features and other, less costly options that a bank offers.
-- Monitor overdraft programs for excessive or chronic use. If a customer overdraws more than six times in a rolling 12-month period, the bank should take "meaningful action," including contacting the customer to discuss less costly ways to have overdrafts covered. These could include linking a savings account or credit card to the customer's checking account or offering an overdraft line of credit.
-- Place a cap on the number of overdraft fees that could be charged in a single day, or create a daily limit on the total amount that could be debited in overdraft charges to a single account.
-- Suggest low-cost financial counseling for those whose overdraft activity indicates they may need remedial help.
-- Eliminate misleading balance information that results from including the overdraft credit limit in the "available balance."
Currently, the bulk of the nation's largest banks clear the largest checks first. They say that this reordering of checks ensures that a customer's most important payments, such as on a mortgage or car loan, are paid when the customer is most likely to have sufficient funds. But consumer advocates maintain that the practice is a thinly disguised bid to boost overdraft fees by wiping out an account balance faster, making every subsequent transaction subject to an overdraft fee.
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Personal Finance - More Consumer Protections on Bank Overdrafts May Be Coming
(c) 2010 Kathy Kristof