Prevailing overdraft practices artificially drive up fees
Banks and credit unions now enroll many of their account holders into the most expensive option for covering overdrafts—an option customers generally don’t want and didn’t ask for—and leave them without the information they need to protect their funds. Under these systems, financial institutions routinely approve uncovered transactions without warning their customers of a deficit in their accounts, and charge an average $34 fee for each incident, even when the uncovered purchase is for just a few dollars.
Fees vastly outweigh shortfalls
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Overdraft fees threaten security of older Americans
Americans who depend heavily on Social Security income pay nearly $1 billion per year in fees for unauthorized overdrafts, as banks use practices that catch account holders in the red and maximize the fees they can charge.
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Almost half of all overdrafts (46%) are triggered by debit cards at the ATM or the point of sale. These overdrafts could be easily prevented with a warning or denial. Most debit point-of-sale overdrafts are small, averaging less than half this $34 fee, meaning that these overdraft loans cost nearly $2 for every dollar advanced to cover the shortfall.
Unfair practices
Unfair practices include holding deposits longer than necessary and clearing daily transactions from the highest to the lowest, which often allows the bank to charge more fees than are warranted. Banks and credit unions are collecting $17.5 billion per year in abusive overdraft fees, higher even than the $15.8 billion extended in funds to cover the overdrafts.
Consumer Information
Been burned by overdraft fees? Read stories and watch videos of others who have had similar experiences, submit your own story, and find out what you can do to stop unfair practices. |
Research and Analysis
CRL and other researchers have found that overdraft fees have shot up in the past few years and are now costing consumers billions per year. They hit young adults and lower-income people the hardest, and the rise in fees is fueled by unfair bank practices. A series of research reports provides numbers and details. Read overdraft lending research>>. |
Policy Recommendations
Congress can stop the abuse
CRL urges Congress to pass H.R. 946, the Consumer Overdraft Fair Practices Act introduced by Rep. Carolyn Maloney (D-NY), which would protect consumers from abusive overdraft loans while preserving occasional courtesy overdrafts.
See our policy recommendations |
