New rules proposed in Congress for overdraft charges
If the Fairness and Accountability in Receiving (FAIR) Overdraft Coverage act passes, it will do many things, including:
- require banks to warn customers if a withdrawal made at an ATM or bank branch will overdraw their account.
- keeping banks from processing debits to make it likely that more transactions will incur "bounce" fees
- require overdraft fees to be in proportion to the bank's costs in processing them
- forbid banks from automatically enrolling customers in overdraft programs without their permission
- prohibit banks from including overdraft protection in a statement of the customer's available balance
- limit the number of overdraft fees that banks can charge from one per month to six per year
Whatever you think of overdraft protection -- that it's needed or not -- it's clear that banks are making a mint from these fees. Brown, a Democratic Senator from Ohio, said that the Buckeye State alone paid nearly $900 million in overdraft charges last year. I've made this comment in a WalletPop post before, but I can't help seeing the potential overdraft fees savings of 2010 as a much-needed jolt to the economy.
If Moebs Services, the research company, is right about its often-quoted $38.5 billion that will be spent on overdraft charges this year alone ... well, just think where that $38.5 billion might be spent next year -- at restaurants, shopping malls, grocery stores, put into savings accounts ...
So it'll be interesting to see where this all goes. For now, this is just pending legislation, but with a Democratic-controlled Congress and a Democratic president, it seems likely that overdraft charges are going to become near extinct, which, of course, begs the question: What on Earth will the banks come up with to replace them?