The Q&A law | Banks, overdraft fees come under closer scrutiny | Columns


Are there any regulations on what fees banks can charge on an overdraft account? Can they charge whatever they want?

Not much, and yes, almost.

When you have lost your checking account, even by mistake, the fees can be high. Indeed, it is reported that banks generate nearly $ 15.5 billion annually in overdraft fees, which accounts for two-thirds of all bank fee income in the United States.

While there is no particular limit on the amount of charges billed or when they can be incurred, the Federal Consumer Financial Protection Bureau (CFPB) has found that unless the customer has agreed to the charges. Terms of overdraft fees before fees are billed, these fees violate many federal consumer protection laws.

Banks are required to obtain the customer’s consent to all terms of use of the account. Typically, a bank will ask the customer to sign a deposit or account agreement when opening a new account or using a new service. These agreements are supposed to set out when and how overdraft fees will be charged.

Beyond that, there is little regulation on the amounts or how they are billed. Banks may even charge you multiple overdraft fees in a single day.

This is because the banks might not charge you in the order of the overdrafts, but according to the amount. This is true not only on withdrawals, but on deposits.

A deposited check you are relying on is blocked if the bank credits a smaller one first, triggering an overdraft.

Different banks may limit themselves in your account agreement as to the number of days they charge. Bank of America has four, for example. Hunt three, and with a total cap.

You can purchase overdraft hedging services from the bank. For example, you can pay an agreed fee on overdrafts, but the bank allows your transactions to be processed. If you have more than one account, the bank may, as part of its hedging contract, automatically transfer funds from one to the other to cover or minimize the overdraft. But then there is usually a charge for each such event.

Or there is overdraft insurance you can buy when a monthly fee is charged for a line of credit to cover your overdrafts – in effect, the bank lends you money for your overdraft so you don’t report it as overdraft. .

Ultimately, you either pay the bank a penalty for an overdraft, or you pay an agreed purchase price for some type of service that the bank offers to cover the overdraft.

Hence the turnover of 15 billion dollars per year.

Chase has just announced a drop in its overdraft fees. Is it because his board, like Scrooge, had an eye-opener for mankind after being visited by three Christmas ghosts? Or maybe it was the spirit of the CFPB, which made noise by calling for stricter regulation of the banking industry’s overdraft fee practices.

Was Chase then trying to signal that he would be kinder and gentler to consumers in order to avoid being regulated?

After all, as Marley’s ghost lamented, humanity should be his business.

God bless us, every bank shareholder.

Brett Kepley is a lawyer with Land of Lincoln Legal Aid Inc. Send your questions to The Law Q&A, 302 N. First St., Champaign, IL 61820.


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