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article imageThose Pesky Bank Overdraft Fees Are Finally Going Away

By Joan Firstenberg     Nov 15, 2009 in Business
Finally, a change in bank practices that consumers will really benefit from - as of next summer, they will no longer be allowed to charge customers overdraft fees on their accounts.
It appears the recession has gotten deep enough that real consumer protections from banking institutions are being put in place. The Washington Post reports that by next summer, financial institution will no longer be allowed to charge customers any overdraft fess on transactions either at automated teller machines, or with debit cards.
Federal Reserve Board Chairman Ben S. Bernanke puts it this way..
"The final overdraft rules represent an important step forward in consumer protection,"
But not everyone is pleased. Some say the change didn't go far enough. Eric Halperin, director of the Washington office of the Center for Responsible Lending says
"We appreciate that the Fed chose to implement the strongest overdraft reform rule it was considering. But this improvement is undermined by the Fed's failure to propose or enact necessary safeguards against a host of unfair practices."
For example, Halperin points out that the changes don't stop banks from charging an unlimited number of overdraft fees in one single day, even if the transactions are small.
Banks will have to give all their customers a chance to opt in to an overdraft system that will keep them covered (at a cost) from overdrafts. Banks have to comply with the new regulation by July 1st. But we could technically still be charged an overdraft fee until August 15th. The Fed said it's giving the extra time so customers can explore less expensive options to cover shortfalls in their accounts.
Banks have become increasingly reliant upon the income from overdraft fees.
In fact, the Center for Responsible Lending says overdraft fees rose 35 percent from 2006 to 2008. The nonprofit group says in 2008, banks and credit unions collected nearly $24 billion in such fees.
More about Greek banks, Overdraft fees, Recession
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