Rael
08-17-2010, 09:14 PM
Don't opt in! Ignore your bank's plea to stay in its overdraft program
ATM Under new Federal Reserve rules that become effective this Sunday, August 15, debit card purchases or ATM transactions that would exceed a current customer’s balance will not be processed unless he or she has agreed in advance to overdraft protection. If you’re currently enrolled in one of these programs you’ll automatically be opted-out; if you wish to continue you must re-enroll and provide your signature.
Previously, banks automatically signed up consumers for the service and then charged them hefty fees whenever it covered an overdraft. Those fees add up to billions in profits, so as the date looms you’re likely to see a lot of hype from your bank promising you peace of mind by enrolling in its program. Before you do, remember that there are often much cheaper ways to cover transactions that exceed your balance.
Unfortunately, the new rules don’t prevent banks from imposing overdraft fees to cover checks or debits for reoccurring bill payments. They also don’t prohibit banks from processing transactions in a way that maximizes fees charged to customers that do opt-in.
That was the focus of a California case involving Wells Fargo. A federal judge ordered it to pay California customers $203 million in restitution on Tuesday to settle claims that it had manipulated transactions to maximize overdraft fees. Instead of processing transactions in the order in which they were received, Wells Fargo put through the largest first, resulting in multiple charges instead of just one. The 90-page opinion called the practice unfair and deceptive, and ordered the bank to stop the practice by this November 30. Wells Fargo said it will appeal.
Now Consumers Union is working to ensure that such practices are banned and these overdraft programs are affordable for those who do Opt-In. Legislation in Congress will go farther to protect consumers then the Federal Reserve's Rule, in the following ways:
• Prohibit banks from manipulating the clearing of transactions to maximize fees.
• Limit the number of overdraft fees financial institutions can charge to six per year.
• Require fees to be reasonable and proportional to the cost to the financial institution.
• Clarify that banks must clearly disclose the cost of overdraft fees as required under the Truth in Lending Act.
ATM Under new Federal Reserve rules that become effective this Sunday, August 15, debit card purchases or ATM transactions that would exceed a current customer’s balance will not be processed unless he or she has agreed in advance to overdraft protection. If you’re currently enrolled in one of these programs you’ll automatically be opted-out; if you wish to continue you must re-enroll and provide your signature.
Previously, banks automatically signed up consumers for the service and then charged them hefty fees whenever it covered an overdraft. Those fees add up to billions in profits, so as the date looms you’re likely to see a lot of hype from your bank promising you peace of mind by enrolling in its program. Before you do, remember that there are often much cheaper ways to cover transactions that exceed your balance.
Unfortunately, the new rules don’t prevent banks from imposing overdraft fees to cover checks or debits for reoccurring bill payments. They also don’t prohibit banks from processing transactions in a way that maximizes fees charged to customers that do opt-in.
That was the focus of a California case involving Wells Fargo. A federal judge ordered it to pay California customers $203 million in restitution on Tuesday to settle claims that it had manipulated transactions to maximize overdraft fees. Instead of processing transactions in the order in which they were received, Wells Fargo put through the largest first, resulting in multiple charges instead of just one. The 90-page opinion called the practice unfair and deceptive, and ordered the bank to stop the practice by this November 30. Wells Fargo said it will appeal.
Now Consumers Union is working to ensure that such practices are banned and these overdraft programs are affordable for those who do Opt-In. Legislation in Congress will go farther to protect consumers then the Federal Reserve's Rule, in the following ways:
• Prohibit banks from manipulating the clearing of transactions to maximize fees.
• Limit the number of overdraft fees financial institutions can charge to six per year.
• Require fees to be reasonable and proportional to the cost to the financial institution.
• Clarify that banks must clearly disclose the cost of overdraft fees as required under the Truth in Lending Act.