Friday, November 13, 2009

Hooray for the New Overdraft Rules

Yes, its taken a long time. Yes, it has needed urging through proposed legislation in Congress. Yes, it has taken the coordinated efforts of several federal agencies. But, success at last. Yesterday, the Federal Reserve Bank announced final rules amending Regulation E of the Electronic Funds Transfer Act (see press release). As we've complained here before, these overdraft charges amount to about $1.7 billion each year in fees to banks (See FDIC Study, How Your $4 Cup of Coffee). There were a number of touchy issues with the banks pushing back firmly on how the rules would come out. Fortunately, the Federal Reserve seems to have come down firmly on the side of consumers on most of the issues primarily raised by debit card use.

So, here are the highlights:
  1. Banks must comply with the Final Rules as of July 1, 2010

  2. Banks cannot charge an overdraft fee on ATM and point-of-sale debit card (POS) transactions without the customer affirmatively opting-in to overdraft protection

  3. The rules apply to existing and new accounts

  4. Banks must offer the same account terms to customers who do not choose overdraft protection for ATM and POS transactions

Three issues remain unresolved by the Final Rules: (i) the size of overdraft fees (often $35 per transaction with no daily limit on the number of transactions charged; (ii) the batch reordering of transactions done by banks to increase the amount of fees generated on transactions by customers who do opt-in; and (iii) debit holds that trigger overdraft fees on transactions such as gasoline, hotels and restaurants. These gaps aside, the progress made by the Federal Reserve on debit cards is substantial.

Remember, banks can still charge the fees on those who have not opted-in until July 2010. So, still use your debit cards with care. As for me, I will not be opting-in, but will await the sales pitch that banks will inevitably make.


- JSM

8 comments:

Yiff said...

i started a web site last week, the name was robcitbank.com, the main purpose of this website was to try to get enough people together to freeze their accounts with city bank and go open an account with other banks. if we all get together and take our money out and tell citi we wont come back unless they tell us there is no more overdraft fees, specially in this horrible resseshion. we are just starting with citi, and if we get traction then we were going to move to wellsfargo and others till all banks eliminate overdraft fees. but, our site was shut down before it was even up for 24 hours. i just don't know what to do. this banks are way too big to fight with. some one needs to do something. this is just not fair.

Anonymous said...

I received 11 overdraft fees in Dec 09. January I filed a small claims suit against Bank of America challenging the fairness of their fees and a week later I got a call reversing all the fees and refunding the fee for filing the claim. You don't like fees file a small claims suit. When an institute applies fees to your account they are not out any money so you just got to make it more cost effective for them to reverse the fees than to pay someone to defend them.

Anonymous said...

What's wrong with this comment? "I received 11 overdraft fees in Dec 09....." Excuse me?? 11 ODs?? Why can you be sooo irresponsible and overdraft your account AND expect a for profit organization to float you money... for free?? Why does that makes sense? It doesn't. Simply mind your account and don't overdraft and you won't have to sue anyone! It's quite simple. What happen to basic responsibility and basic money management. Don't spend what you don't have. It is NOT some one else's fault!! It's yours.

Iamawriter said...

Hi Anonymous,

I like your idea. I have spent almost 2 1/2 hours this week on the phone with the bank trying to get overdraft fees that they promised would not occur refunded. Was it a local bank or a "big, monster, mega bank"?

Do mind sharing what you said the small claims suit you filed?

Thanks!

Iamawriter said...

I like your idea. Was it with a local bank or a "big, monster, mega bank"?

Do you mind sharing what you put in your lawsuit?

Thanks

Iamawriter said...

I like your idea. Was it with a local bank or a "big, monster, mega bank"?

Do you mind sharing what you put in your lawsuit?

Thanks

Iamawriter said...

I like your idea. Was it with a local bank or a "big, monster, mega bank"?

Do you mind sharing what you put in your lawsuit?

Thanks

Anonymous said...

Things happen! Is it fair to be charged 35 dollars for a 5 dollar transaction? Most people get charged an overdraft fee for transactions that are substantially less. Banks call it overdraft protection they should call it overdraft collection!