Fed adopts strong rules blocking bank overdraft fees

[Roland99]

Source: MarketWatch

WASHINGTON (MarketWatch) -- Financial institutions will be prohibited from charging consumers fees for paying overdrafts on automated teller machines or one-time debit card transactions unless a consumer agrees to the protection first, according to strong new rules for the $38 billion overdraft industry approved Thursday by the Federal Reserve.

...

Many consumers automatically receive overdraft protection, where they can overdraw their accounts, and banks will cover the transaction with fees as large as $35 for each overdraft, irregardless of the size of the draw.

With the new rules, consumers will be unable to withdraw money from ATMs if they have no funds and they opt out of the protection. The central bank added that tests show that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions.

The rules do not cover overdraft protection for checks or recurring ATM payments. A Fed official said that based on its studies consumers preferred to have overdraft protection for checks or recurring ATM payments because these kinds of fees are for major payments they want to make sure get paid, such as mortgage or utility payments.

Read more: http://www.marketwatch.com/story/fed-adopts-strong-rule...

---

Finally!

It's not that hard to program systems to handle this. It just wasn't as profitable for banks so they let things slide and then re-sort transactions in highest to lowest order to screw us over even more on NSF fees.

At least banks like BoA and Chase now will sort transactions in chronological order (I could deal with that.)

[VWolf]

1. "irregardless" ???

Who writes these things?

Anyhoo, I think it's a step in the right direction. I'd never opt into an "overdraft protection" program. It's got "scam" written all over it.

[Roland99]

2. I can't believe I didn't catch that one, myself!

[RebelOne]

32. I missed it also. And I am a copy editor.

[Cal Carpenter]

5. LOL, I totally got stuck there too

I can't believe editors let shit like that get by.

[Earth_First]

26. Awesome!

Kudos!

[marshall]

29. I prefer "irrespective"

http://www.merriam-webster.com/dictionary/IRREGARDLESS

[BumRushDaShow]

3. Why should they make you "opt out"?

It should be "opt in" only like it used to be... But they know that the average person probably doesn't read their endless, multi-paged, small font size agreement changes junk mail, so they'll continue to make money off that ignorance.

Support Credit Unions!

[WriteDown]

4. Damned if they do or don't...

If its opt-in then people who OD their checking accounts and suddenly can't pay for dinner will scream bloody murder. If they opt-out then people who can pay for dinner but are then charged a fee for it later will scream bloody murder. Not hard to see what's coming.

[SOS]

24. It's opt in for new accounts

while existing account holders will finally have the consumer choice of opting out.
Freedom for the customers to use the service as they wish.
(Of course 90% will say "hell no", but that's the banks problem).
Only downside is the August 15 2010 start date.
I want to opt out NOW.

[Commie Pinko Dirtbag]

28. Yeah, poor bankers, always being oppressed by the evil rabble. -nt

[mbperrin]

31. Just use cash. No cash, don't spend.

Thanks to gawd, I haven't had to deal with a bank in 35 years, and I will tell you, it feels good!

[treestar]

34. What about incoming?

You'd have to get paid in cash, too, otherwise, don't you need a bank to cash the check? Or those check cashing places, but aren't they considered banks and don't they have their own outrageous acts?

[mbperrin]

36. Take it to the bank it's drawn on. If they have an out of town bank,

insist on cash.

Not difficult at all.

[treestar]

38. OK but you're still using a bank

Though of course they can't get you for fees of any kind if you're not using it for payouts.

but then how do you do everything in cash? Take it to the creditor's office? And what if that's far away? Money orders?

[mbperrin]

39. Pay the electric, water, and cable in person. We have no mortgage,

car payments, or credit cards.

Most of our renters understand our feelings and pay in cash.

It's really somewhat shocking when you realize how much of your income is eaten by fees, fines, and interest payments. Keep a journal for 6 months listing every additional one of these charges and add it up. My students always find it shocking as well.

[SOS]

40. Check cashing places in NYC charge 1%

They are actually much more honest and straightforward than the big banks.

[Gormy Cuss]

37. Opt-in provisions nearly always have lower participation rates-- in most cases, dramatically so--

and this will kill the profitability of these so-called "overdraft protection" products.

Real overdraft protection for consumers comes in the form of overdraft lines of credit (where interest is charged but not high fees) or companion savings accounts that can be swept for funds to cover overdrafts. Both of those products have existed for years.

[KansDem]

25. "...endless, multi-paged, small font size agreement changes."

Don't forget "font color." I once had a credit card company that would send me such "notices" on the back of my statements written in something like 8-point, very light brown font. It was almost impossible to read!

[treestar]

35. And they are so long

And unreadable. One wonders why such a simple thing as a bank account requires such a long contract, but it's probably because they are covering everything under the sun that ever went wrong in the past.

[PHIMG]

6. Nice PR move for the Fed

I'm with Thom Hartmann, it is time to put the "Federal" in Federal Reserve... Nationalize it.

[mzmolly]

7. Let's hope agreeing to the "protection" doesn't just mean being handed signature card

with the agreement in fine print?

Either way, a step forward ...

[David Zephyr]

16. I agree.

.

[DesertDiamond]

8. A help for me! Because of my dyslexia, using ATM card protected me bkz if I messed up my numbers it

wouldn't let me take out any money. Before that, using checks, I would enter one transaction with the numbers backwards and end up losing half my paycheck to overdraft fees. Then suddenly even using ATM card I would get bounces. I tried to explain to my bank that because of my handicap I needed not to be able to take out money if there was none there. But they couldn't do anything because it was the bank's policy. Now again I can be protected. Thank goodness!!

[Eenkling]

17. Don't Count On This Working

The bank has already protected itself. Note that if you use a
check or an automatic ATM debit they can STILL charge you an
outrageous fee AND not pay out one thin dime to the
establishment that is requesting the money. I had it happen
to me with Bank of America over the weekend. I paid for
something through Paypal and the debit accidentally went to
my bank because it is the default on the account, (and
usually how I pay). I immediately called BofA which refused
to do anything. Their terminal response is "if it is in
error you can file ... blah, blah, blah". Even though
BofA DID NOT pay any money to anybody they STILL fined my
account $35.00. THEN to add insult to injury it caused other
items that were submitted for payment after that to get
charged a $35.00 fee each. The other items would've been
covered had BofA not charged me a $35.00 fee ont he FIRST
item. It has cost me $90.00 PLUS the outrageous cost of a
high interest quick loan because I erroneously didn't choose
the other payment option and it automatically defaulted to
BofA for payment. This is highway robbery. They never paid
out a penny, yet still charged me the fees.  

[bedazzled]

19. i almost made that mistake the other day with paypal

i have reconsidered giving them access to my bank
accounts, that's for sure...

[Gormy Cuss]

9. Opt in is the kiss of death for such schemes.

Opt outs are popular because of the high participation rates at low cost to the company. In order to get similar rates with opt in it will require a lot of money invested in a marketing campaign.

[guruoo]

10. Black marking your credit rating over a dropped card should be illegal, too

[OffWithTheirHeads]

11. Effective when? Not 2025 I hope.

[SOS]

22. August 15, 2010 for existing accounts

I've got the date marked.
That's the day I march into my bank and tell them: "Get that sh!t off my account now!!"

July 1, 2010 for new accounts.

[intheflow]

12. It's not like this wasn't the way ATMs were set up in the first place.

All POS transactions were declined if you had insufficient funds. Then the banks sneakily changed that system so they could charge outrageous overdraft fees. I'm very glad to hear this has gone through!

[abqmufc]

13. It will help those who need it, and those who take advantage will do so...

My first bank account was done under my parents credit at our local bank. B/c of that I got overdraft protection. At 18 and immature, once I figured out "what that was", I used the hell out of it. It was like "free money". I abused the system and that should not be rewarded.

Last year, 20 years later, I went to England. I called my bank told them of the travel to ensure my debit card (no personal credit cards) would not be shut off for odd transactions. They thanked me and I asked "anything else i should know like surcharges?" They said "no".

Well half way through the trip I was out of money, I had no idea why as I carefully budgeted my money on my ATM card and cash. My bank failed to tell me (even though I asked) that each transaction I made in the UK had a "exchange rate processing fee". So each transaction had an added charge that I was unaware of. Of course the charge was not just $2.50. It was more to the effect of $10.00 (regardless if it was a pound for a cup of coffee).

If this measure stops the later from happening hooray! Maturity and respect of the rules is all that will change the first scenario. (at least for me that's all that did it)

[happyslug]

14. The banks are trying to make these fees legal???

You must understand late fees that do NOT approximate the cost to the bank are illegal "Penalties". "Penalties" are NOT permitted for violations of Contracts, all the non-breaching party can recover is the actual damage do to the breech. Now, the Courts have permitted "Liquidated Damages" in situation where damages are hard to determine BUT ONLY IF SUCH LIQUIDATED DAMAGES APPROXIMATES THE COST INCURRED BY THE NON-BREECHING PARTY. i.e. Over bounce check fees would be legal if they reflect the actual cost of the bounce check to the bank, but since at least the 1960s (if not before) the actual cost incurred by the Bank for a bounce check is measured in pennies not dollars (i.e. a $1 bounce check fee would be legal for it approximate the cost incurred by the bank for the bounced check, but a $32 dollar fee is illegal for it is to penalize the person who bounced the check NOT to actually give the non-breeching party his or her damages).

Now, the cost of most Bounced Check Fees are rarely challenge, for people have to sue their own bank to get the money back. Most people do not believe this is worth the effort and leave the bank charge the fee, but it is technically illegal but you have to sue the bank to get the fee returned (and the bank will just close your account so you have to open an account in another bank). One of the reason bounce check fees run about $32 is the Banks have determined most people will NOT challenge such a fee for it is "low" enough for them to eat it. The banks count on this and such fees are a major part of their profits at the present time. Thus the bank have to balance between profits from the fees, and the fact if they make the fee to high people will sue the bank for the fee to be returned. For example if I was charged a late fee, it will come out of my account. I still have to make good on the check so I will pay the bank the money for the check and the fee so the check will clear. I then have to sue the bank for the fee, paying the local Justice of the peace $75-100 for the right just to sue the bank for $32. I get the filing fee in addition to the $32, but that means I have up to $130-150 tied up for about a month before the JP rules that I am right and the bank has to return the fee. At that point the bank will return the fee for it is not worth the money for them to file an appeal to a Court of General Jurisdiction (Common Pleas in my Home state of PA, Supreme court in New York State, Superior Court in California). The reason for the lack of an appeal is that the bank knows that the Court of General Jurisdiction knows it is an illegal fee and they will lose in front of that court.

Notice, while the fee is illegal it is very hard to enforce that fact given the above. Thus most people just pay the fee, bitch about it but do not sue the bank to get the fee returned. My comment is given the above is the Federal Government trying to make it LEGAL for such Bounce Check fees? This SOUNDS like it is designed to help most people, but if you understand the underlying law it may be designed to protect the bank more then you and I.

[Devil_Fish]

18. thanks, I didn't know that. NT

[depakid]

15. "the rules that go into effect next summer"

I guess at least that beats sometime in 2013....

[ovidsen]

20. Big Banks laughable defense of outrageous "overdraft" fees

This gem of a letter from Richard Hunt, the President of the Consumer Bankers Association was in the NYTimes on Monday (11/23). It goes without saying that Hunt's group thinks the banks can do no wrong, and they are actually doing us a favor with those $35 "overdraft protection" fees.

It's such a piece of bullshit that I almost fell of my chair reading it. I bet you will, too.

http://www.nytimes.com/2009/11/24/opinion/l24overdraft....

[Wednesdays]

21. And yet they return the checks ANYWAY

Yeah, some overdraft protection. Last weekend we made the mistake of thinking our paycheck would be direct-deposited on Wednesday, but instead it went in on Friday. As a result, we had six NSF checks, resulting in $150 in overdraft charges. But here's the kicker: the institution returned the checks ANYWAY! Sweet deal for them, ain't it?

Here's the REAL kicker: our account is with Oklahoma Employees CREDIT UNION!

[SOS]

23. "Recurring ATM payments"

Who writes this stuff?

[Doremus]

27. You know what's going to happen ....

For those who opt out they're going to refuse the charge and STILL collect the NSF charge.

Count on it.

[depakid]

30. Democrats missed out on a chance to do this themselves and gain a LOT of favor

But instead they pandered to the banksters- so it's a good thing the Fed stepped in and put a stop to this abusive practice.

[SOS]

41. Indeed

The Democratically-controlled Congress should have enacted this in early 2009.
Instead they pandered to their owners and did nothing.

Iraq War Resolution? 6 months from vote to invasion.
TARP? A few days for billions to Wall Street.

Debit card fee opt out? NOTHING.
Buncha lackeys.

[treestar]

33. I got the protection for $20 per year

It's worth it, in case you forget to record something. I did that and it caused several overdraft fees, which I didn't realize were adding up until I got my statement. I'd definitely have preferred for the ATM to refuse to give me any money so I could fix it rather than have this so called protection.