Fed wants your opinion on bank overdraft fees[SIZE=-1]The Federal Reserve Board is seeking public comment on two proposals to reduce the number of unexpected overdraft fees being charged banking customers.
The proposals respond to criticism that financial institutions often automatically enroll their customers in overdraft programs that charge a fee whenever customers exceed their account balances using a debit card or at the ATM. Rather than simply stop the transaction from going through, the institutions allow the overdraft and then slap customers with fees ranging from $10 to $38 per transaction, according to a recent study by the Federal Deposit Insurance Corporation. In many cases, customers aren?t told they?ve been enrolled in such a program, and some institutions won?t let them out of it.
One of the proposals would prevent institutions from charging overdraft fees unless they first inform customers and allow them to opt out. The alternative would prohibit charging such fees for customers unless they consent ? or opt in ? to the program.
Neither proposal would cover overdrafts from checks, pre-authorized electronic funds transfers, or cases in which customers give merchants and others direct access to their checking accounts.
The proposals would also prohibit banks in certain cases from charging overdraft fees if the only reason the overdraft occurred was that a merchant placed a ?hold? on the customer?s account in excess of the amount actually charged. Rental car companies, hotels, gas stations, and restaurants use holds to reserve a certain amount of customers? account balances to cover what their final bill might be. Holds can amount to several hundred dollars and take days to clear, causing customers to overdraw their accounts unknowingly.
Consumers Union, publisher of Consumer Reports and this blog, and other groups have urged Congress to rein in abusive overdraft practices. To file a comment with the agency before the March 30 deadline or for more information about the proposals, visit the Consumers Union Web site. ? Anthony Giorgianni
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