FED: "Banks Need Customer Consent on Overdraft Fees"

[Total_Blender]

So without overdraft coverage, what happens if you bounce... do they just not process the transaction?

This could get sticky, like say someone goes to a restaraunt and eats a meal then they can't pay with their card. That would probably be the same penalty as shoplifting or petty theft, right?

Or would they let it go through and then count it against you as a bad check?

I'm not against the banks charging fees because allowing the transactions to pass keeps consumers who DO overdraft out of some sticky legal situations like that. The problem is that the fees are not proportional to the amount of overdraft because the fees are assessed at a flat rate. Like if you overdraft by $0.01 its a $30 fee

And most banks, like Wachovia, process the largest transactions first. Say you have a bunch of little $2 transactions and a big $100 transaction, the big one will pass first and the little ones will come after. So if you have an overdraft, you get charged the flat rate fee for every little $2 transaction that wouldn't pass.

Its fucked up that someone can overdraft by $10 and rack up hundreds in fees. But the banks DO have protections for consumers, like they can link your savings account or credit card to your checking so it will cover the overdrafts and you won't get charged fees.

Banks aren't supposed to make their money through fees, banks have traditionally made their money by collecting interest on the money they loan out. When you put money into a bank, you make it available to that bank to loan out to other consumers and earn interest for the bank.

I don't have a number handy for the amount of money that banks are making off of overdraft fees, but I know that its a lot. And if any lobby has the influence to get its own way with congress, its the banking lobby. So this is something I'll be watching closely. I'm in favor of reform to a point that it protects consumers, but if the banking industry has too much influence on the final product, we may end up with something worse than before.

[green91]

I'm not against the banks charging fees because allowing the transactions to pass keeps consumers who DO overdraft out of some sticky legal situations like that.

Thats why banks offer Overdraft protection also. I personally carry this. They give you the option to either tie your Checking to a savings account and will move funds over in the event of an overdraft, or also to have a line of credit associated with your checking account in the event that you drain your positive cash.

You do have to request these but once again most people don't know this. Thats why rather than being complacent, people need to ask questions and have a plan in place rather than waiting until they've overdrawn their accounts and are looking at hundreds in fees face to face.