The Federal Reserve Board is seeking public comment on overdraft fees and has proposed a regulation requiring banks to ask permission before enrolling customers in overdraft programs.
Typically, banks approve overdrafts on ATM and debit cards and–often without notification–charge customers as much as $60 as part of an “overdraft protection program.”
A new Federal Deposit Insurance Corporation (FDIC) study found that banks and credit unions charge Americans billions in overdraft fees every year. Econ4U’s most recent survey showed that 50% of respondents admitted to having overdrawn their checking account. Banks typically charge $35 on a $5 overdraft (a 700% interest rate!), which makes these fees much more expensive than any other form of short-term borrowing.
Considering the growing number of Americans who are unfairly slammed by overdraft fees, this closer scrutiny is welcome, and long overdue.
3 Comments
700% overdraft fee for a $5 overdraft is an outrage. When will we see the reemergence of the old “usury” laws? Why should banks compute interest paid on passbook accounts differently than their interest calculation for loans? What benefit does the public get from ‘oversight?’
Considering fees as interest rates I’ve always found pretty dubious, but these fees are absurd. Particularly when the bank isn’t even telling people they’re going to overdraft! Something should be done.
Did you know that USA and Europe blocked Wikileaks? What do you think about it?
Hope for answer