Bloomberg reports that the Federal Reserve will prohibit banks from charging overdraft fees on ATMs and debit cards, unless the bank customer or credit union member agrees to pay charges for exceeding account balances. And financial companies that do impose fees will be required to explain their overdraft programs, as well as the choices they are offering consumers.
The final Fed rules will require banks to provide the same terms, including prices, for consumers who decline overdraft protection. The rules take effect July 1. Consumers who decline to join a program may be denied access to cash at an ATM or have their debit-card transactions rejected.
According to a statement released by the Fed, lenders last year collected almost $37 billion in overdraft fees:
"The final overdraft rules represent an important step forward in consumer protection," said Federal Reserve chairman Ben S. Bernanke. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service." House and Senate committees have introduced separate legislation that would restrict banks' ability to charge overdraft fees. Both bills would permit one overdraft fee a month or six in a year.
Giving consumers a choice is important, "but we need to do far more to protect customers from abusive bank products," said Senate Banking Committee Chairman Christopher Dodd in a statement. "We still need to stop the excessive fees, repeated charges, lax notifications and processing manipulation" in overdraft-protection programs.
Dodd introduced legislation Nov. 10 that would give Congress more power in naming the central bank officials who set interest rates. Dodd's plan would create a Consumer Financial Protection Agency, which would assume the Fed's role on consumer issues.
Fed consumer research shows "most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit- card transactions unless they affirmatively consent."
