Agency to investigate overdraft fees
Acting on complaints about high overdraft fees on checking accounts, the new consumer bureau launched a broad inquiry into bank practices and is seeking public input on a special disclosure box about the fees on monthly statements.
The Consumer Financial Protection Bureau said Wednesday that it also is starting a campaign called “What’s your overdraft status?” to encourage people to learn if they have chosen overdraft protection and to understand the fees involved.
In 2010, the Federal Reserve enacted rules that prevent banks from automatically enrolling customers in overdraft protection plans, which charge $30 to $35 for each use.
Consumer advocates, however, are still complaining about the fees, which are overseen by the new agency. The consumer bureau said the average overdraft fee has increased 17% over the last five years.
“With today’s technologies, consumers have more opportunities to access their checking accounts and cause overdrafts,” said Richard Cordray, the agency’s director, noting that debit card and ATM transactions also can trigger the fees.
“But overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it,” he said. “We want to learn how consumers are affected and how well they are able to anticipate and avoid paying penalty fees.”
High bank fees were a focus of Occupy Wall Street protesters, who helped torpedo Bank of America’s planned $5 monthly debit card fee last fall.
In November, BofA agreed to pay $410 million to settle a class action suit covering debit card overdrafts by more than 13 million customers. The suit, which is similar to those filed against more than 30 other banks, charged that Bank of America processed higher debit card transactions first to maximize the overdraft fees charged to customers.
The consumer bureau said it wants to examine the practice of reordering debit card payments, checks, bills and ATM withdrawals. The review will also look at how clearly overdraft terms are disclosed to consumers and whether the fees disproportionately affect young and low-income consumers.
The agency will seek public comments about a penalty fee box to appear on checking account statements that would highlight the amount overdrawn and the total overdraft fees charged to the customer.
