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Fed: banks need customer consent on overdraft fees.


metsfan

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By CHRISTOPHER S. RUGABER, AP Economics Writer – 11 mins ago

 

WASHINGTON – Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced Thursday by the Federal Reserve.

 

The rule responds to complaints from consumer groups, members of Congress and other regulators that the overdraft fees are unfair because many people assume they can't spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.

 

For small purchases, such as a cup of coffee, the penalty can far exceed the actual cost of the transaction.

 

Under the Fed's new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don't "opt in," any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.

 

Many consumers do want checks and regular electronic bill payments to be covered in the event of an overdraft, Fed officials said. As a result, those transactions aren't covered by the rule.

 

Banks earn as much as $25 billion to $38 billion annually from overdraft fees, Fed officials said, but that total includes check overdrafts.

 

Many larger banks, including Bank of America Corp., JPMorgan Chase & Co., U.S. Bank and Wells Fargo & Co. began instituting similar "opt-in" plans in late September after coming under fire for the fees.

 

But consumer groups and other regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair, said new rules were still necessary to ensure smaller banks followed suit.

 

Many lawmakers have criticized the Fed for failing to provide sufficient consumer protection in the past, a defect they say contributed to last year's financial crisis. Sen. Christopher J. Dodd, D-Conn., on Tuesday introduced a bill that would strip the Fed of its consumer oversight.

 

Dodd also proposed legislation last month that would have imposed limits similar to the Fed's on the banks' ability to charge overdraft fees.

 

 

http://news.yahoo.com/s/ap/20091112/ap_on_bi_ge/us_fed_overdraft_fees

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Yea, i'm going to opt out, if i don't have the money i don't have it, i live within a strict inflexible budget & a 35 dollar fee is something i can't afford.

 

- A

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Been the victim of these a couple times. I would never consent to the banks charging me overdraft fees. They can go kiss my a$$ on this one. If you're not bringing in a decent check every week these take forever to take care of. The banks are getting away with legal murder these days and it sickens me. Makes me want to put my money in a safe.

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Good. Screw the banks.

 

"I believe that banking institutions are more dangerous than standing armies. If the American people ever allow private banks to control the issue of currency, the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered." -Thomas Jefferson

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Atleast bank of america give you 5 business days too pay whatever you overdraft before they put a $35.00 overdraft fee by that time you should of been paid off what you went over. Wachovia is ridiculous wih there overdraft policy i went over something for 99cent and they charge me $35.00 for that i couldnt beleave it :confused: but its all good hopefully one of these days the Wachovia Bank will tone down there overdraft fees because for 99cent your going 2 charge me $35.00 thats assurd really

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so what happens then if the bank doesnt take teh fee and move the money? Does the debit card just come up Declined?

 

Yes. 3 declines and your acct is locked till you call CS. Added perk, usually a thief will try one small purchase via credit, if it goes through, they usually try something huge like a car or tv etc. Now with the restriction in place if your card is stolen they are limited to the unknown (to them) amount in the acct, plus the bank alerts the places they try to use the card & they have a better chance of the cops nabbing them.

 

- A

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I don't know what the processing formula is, but a way you can overdraft on a Debit Card is to use your card then have a check you wrote come in that night; if the amount of your debit purchase and the amount of the check are larger than the balance, one will clear and the other will overdraft.

 

Using your PIN debits your account immediately; using the "credit" option or online can leave the transaction pending for up to two or three days.

 

Another thing that is annoying is some merchants apply a small fee for paying with a Debit Card (up to 99 cents). These can add up also.

 

As Mrs.Edwards1 noted, Bank Of America now gives you up to five business days if your Debit Card causes the overdraft to bring your account in the black before a $35.00 "extended" overdraft fee is imposed.

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