Ludovic Bertron / CC-BY-2.0

A federal law passed in 2010 was supposed to relieve Americans nationwide of onerous overdraft fees, but thanks to aggressive marketing campaigns that persuade consumers to “opt in” for overdraft coverage, banks made nearly $14 billion on the “service” in 2015.

“Before the law was passed,” Mark Huffman reports at Consumer Affairs, “a consumer making a debit card purchase, and not having sufficient funds to cover the purchase, would be automatically ‘loaned’ the funds to cover the purchase. The bank would then charge the consumer a fee of $30 or so for that service.”

“The consumer not only had to pay back the money used for the purchase but pay the fee as well. If the consumer made three or four other purchases before becoming aware that he or she was overdrawn, the fees could be well over $100.”

In 2010, Congress passed a law requiring customers to “opt in” for overdraft “services.” Otherwise, the banks would deny purchases attempted with accounts with insufficient funds.

Huffman continues:

A new report from the Center for Responsible Lending (CRL) claims abusive overdraft practices in the banking industry are alive and well. It finds that consumers paid nearly $14 billion in overdraft fees last year.

CRL’s analysis confirms that overdraft abuses continue, carrying an enormous annual price tag for consumers as a whole, and with devastating effects on individuals,” Peter Smith, a Senior Researcher at CRL and the report’s co-author, said in an email to ConsumerAffairs.

After the new law went into effect, posing a threat to banks’ lucrative fee revenue, most banks launched aggressive marketing campaigns to persuade consumers to “opt-in” for overdraft coverage. Many have done so, even though it probably costs them money.

The report claims that some consumers who have not opted in are getting hit with overdraft fees as well. A year ago, the Consumer Financial Protection Bureau (CFPB) fined Regions Bank $7.5 million, saying it levied overdraft fees on thousands of consumers who had not opted-in for overdraft coverage.

—Posted by Alexander Reed Kelly.


If you're reading this, you probably already know that non-profit, independent journalism is under threat worldwide. Independent news sites are overshadowed by larger heavily funded mainstream media that inundate us with hype and noise that barely scratch the surface. We believe that our readers deserve to know the full story. Truthdig writers bravely dig beneath the headlines to give you thought-provoking, investigative reporting and analysis that tells you what’s really happening and who’s rolling up their sleeves to do something about it.

Like you, we believe a well-informed public that doesn’t have blind faith in the status quo can help change the world. Your contribution of as little as $5 monthly or $35 annually will make you a groundbreaking member and lays the foundation of our work.