Unfair bank practices threaten to shred the safety net of Social Security for older Americans
New CRL research finds that unauthorized overdrafts strip fees from Americans 55 and older at the level of $4.5 billion per year. Nearly $1 billion of that comes from people who are heavily dependent on Social Security income.
CRL’s June 18, 2008 report also finds that debit cards are the most frequent trigger for overdrafts even for people 55 and older – these debit card overdrafts are both extremely costly and easy to prevent if the banks were interested in discouraging them. On the contrary, bank practices intentionally maximize overdrafts by automatically approving these debit purchases and changing the order they subtract transactions in their daily account balancing, debiting the highest dollar amount first and artificially increasing the number of $34 fees they can charge.
In new proposed rules, the Federal Reserve Board has acknowledged that banks are using unfair overdraft practices. But their solution doesn’t go far enough.
New rules would not require banks to obtain consent from customers before enrolling them in their most expensive option for covering overdrafts, but would only allow them to opt out of the program after the fact. Consumers should not have to “unsubscribe” from this costly system.
Published: June 18, 2008