| A 2009 USA Today survey found that each of the 10 | | | | financial distress. |
| largest banks allow consumers to overdraw checking | | | | Rep. Carolyn Maloney sponsored legislation requiring |
| accounts. By doing so, banks reaped a record $38.5 | | | | banks to obtain consumers' permission to cover |
| billion from overdraft fees that year, nearly twice the | | | | overdrafts, disclose APRs, and pay transactions in a |
| $20.5 billion collected from credit card penalties, such | | | | way that do not increase fees. The Federal Reserve's |
| as late and over-limit fees. | | | | new regulation prohibits banks from charging overdraft |
| "Overdraft fees are the mother lode of (deposit) fees," | | | | fees on ATM and debit card transactions unless |
| says Michael Moebs of Moebs Services, an economic | | | | consumers "opt in" to overdraft protection. The |
| research firm. "If it weren't for the overdraft fees, 45% | | | | regulation is effective in July 2010 and it protects |
| of banks and credit unions wouldn't have made money | | | | consumers who unknowingly overdraw their accounts. |
| in 2008." | | | | In anticipation to the changes, some banks have |
| Banks have covered a debit card overdraft as small | | | | eliminated "free checking" accounts and are finding |
| as $1 and charged a fee as high as $35 as well as | | | | new ways to raise revenue by hiking ATM fees or |
| charging $7 - $10 daily for being negative after a | | | | introduced charges for features, such as identity theft |
| certain period. Some banks also charge fees before | | | | alerts, that they once offered for free. J.P. Morgan |
| consumers actually overdraw by deducting a | | | | Chase renamed its Chase Free Checking program to |
| purchase when it's made, instead of when the | | | | Chase Checking, and added a $6 monthly fee. TCF |
| transaction clears. And they process transactions in | | | | Financial Corp, a Minnesota based bank who turned |
| order from highest to lowest dollar amount to empty | | | | retail banking upside down in 1986 when it introduced |
| the account quicker and trigger more overdrafts. | | | | "totally free checking" accounts, is now putting an end |
| Banks contend consumers can avoid overdrafts by | | | | to them. |
| keeping track of their money. Consumers contend, | | | | Although overdraft fee charges have been limited, |
| though, that banks' policies make it challenging to avoid | | | | consumers are angry that banks are passing them the |
| fees. Banks have long said that customers appreciate | | | | "bill." Sadly, banks had to rely on overdraft fees to |
| automatic overdraft coverage and that this service | | | | compensate for bad loans. Consumers should |
| helps consumers avoid the embarrassment of a | | | | anticipate new and creative banking fees in the coming |
| declined transaction. In truth, as banks have now | | | | months. |
| acknowledged, these fees can push consumers into | | | | |