Overdraft Loans Overview
Visit msnbc.com for Breaking News, World News, and News about the Economy
Overdraft Fees Explained
Eric Halperin, Director of the Washington office of the Center for Responsible Lending describes the predatory practices banks and credit unions use to drive up overdraft fees.Consumers would rather have a debit card transaction be denied than pay a $34 fee. Many banks don't give them the choice, though, so small shortfalls—the average is $17 for an overdraft triggered by a debit card transaction—can cost twice as much in fees.
In the past decade or so, many of our nation's financial institutions have quietly adopted these overdraft systems, which drive up fees while driving their customers into the red.
In addition to covering shortfalls without providing the chance to cancel transactions, most manipulate their debit-clearing systems, debiting a day's transactions from the highest dollar amount to the lowest, which can also drive up fees.
Overdrafts snowball, so consumers can get in serious trouble quickly. The system costs Americans $23.7 billion per year in unfair fees.
CRL supports vigorous action from Congress and federal regulators to stop banks and credit unions from charging consumers unfair overdraft fees.
