Obama’s administration proposed the Consumer Financial Protection Agency Act in July. The agency would serve the public in banking and financial matters. It is, in a sense, a FDA for banking.

The Consumer Financial Protection Agency would be responsible for creating and enforcing consumer financial protection laws. It would also have authority over mortgages, credit cards, auto loans, student loans, etc.

The CFPA is also proposing to either limit or put an end to the overdraft fees that banks have. The average overdraft cost per transaction is $25. That fee is $25 or more, no matter how much money was overdrawn.
Therein lies the problem: most overdraft fees are a result of small transactions. This is sometimes referred to as the $35 cup of coffee.

Most people assume that all debit cards will be declined if they have insufficient funds. In fact, the three dollars they spent on this cup of coffee can be accepted and they could be charged an overdraft fee.

Most people are unaware that most banks automatically sign people up for “overdraft protection” which allows a person to write a check or make a debit card purchase over their current balance. Well, for a small fee: an overdraft fee.

According to Moebs Services, credit unions made $6.6 billion dollars in overdraft fees in 2007. Should consumers have to give so much money to banks for overdraft fees? It seems a lot easier and cheaper to have your debit card declined and not have to pay an overdraft fee.

In an effort to appease the concern for eliminating overdraft fees, Bank of America and Chase have both updated their overdraft policies. Bank of America will no longer charge overdraft fees for transactions overdrawn by less than $10.

This policy will start Oct. 19. Customers will now be able to “opt out” of overdraft protection and have the transaction denied at the register. This is for new customers and some existing customers.

Chase is removing overdraft fees for purchases under five dollars. The bank is also making overdraft protection an “opt-in” option.

It is encouraging that banks are making an effort to reduce consumer concerns with overdraft fees before the Consumer Financial Protection Agency Act is voted on, but is it too late? Will consumers still demand the reduction or elimination of overdraft fees, or will they be satisfied with the new changes? Many financial institutions stand to lose a lot of money with the elimination of overdraft fees
 

• Facebook Comments
• Site Comments

2 comments

Anonymous

Wed Mar 3 2010 10:08

I actually got hit with the $35 overdraft fee. I was then hit 5 days later for another $35 from the same transaction. This was two days before my notice came in the mail stating I had initially overdraft my account.

Palma

Tue Oct 6 2009 22:48

Overdraft fees are getting outrageous. Did you know that Bank of America is now charging an addition $35 overdraft fee if you haven't made a deposit to cover the negative balance in 5 days? So you pay $35 for each overdrawn item plus the addition $35. I did experience the $35 cup of coffee. It wasn't worth it.

Add comment


I am not posting spam. I understand posting spam or other comments that are unrelated to this article will cause my comment to be flagged for deletion and possibly cause my IP address to be permanently banned from this server.

Enter the characters in the image above:

log out