Many consumers were unaware they had been automatically enrolled in overdraft programs, subjecting them to fees, the Fed said.
Thank the regulatory heavens. The Federal Reserve is moving to prohibit banks from charging overdraft fees on ATM and debit card transactions unless the customer has opted into a program agreeing to pay the extra charges. Banks raked in $37 billion in fees last year, largely through unexplained programs and extraordinarily high levies. —JCL
The Federal Reserve will prohibit banks from charging overdraft fees on automated teller machines or debit cards, unless a customer has agreed to pay extra charges for exceeding account balances.
Financial companies will have to explain overdraft programs and fees, as well as choices available to consumers, the Fed said today in a statement announcing a rule that takes effect next year. Lenders collected almost $37 billion in overdraft fees last year, according to research firm Moebs Services Inc.
“The final overdraft rules represent an important step forward in consumer protection,” Federal Reserve Chairman Ben S. Bernanke said in the statement. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”