Consumers Still Opting In For Overdraft Protection

Consumer Affairs
August 13, 2010
Huffman, Mark

The last of a series of overdraft rules went into effect on Aug. 15, officially preventing banks from automatically enrolling new or existing customers in an overdraft protection program that then allows the bank to charge hefty overdraft fees. However, research has shown that a surprising number of consumers have already opted in for the coverage and many indicate that they plan to do so. Consumer advocates were fairly certain most consumers would say not to the coverage, but a new report from Mintel Comperemedia shows that 36 percent of consumers said they had opted in and another 36 percent said they planned to do so in the future. The banking industry engaged in a marketing blitz, implementing direct mail, e-mail, Web, and phone campaigns to encourage customers to opt in to the program. According to the Center for Responsible Lending, the strategies targeted the most vulnerable consumers using scare tactics and incomplete information. Consumers have paid $23.7 billion annually in costly overdraft fees in recent years, and the CRL says there are a number of less costly alternatives to this kind of coverage. "To avoid costly fees under standard overdraft coverage, customers can sign up for lower cost overdraft alternatives at their bank, such as linking a savings account or credit card for back-up funds, or applying for an overdraft line of credit," the group says on its Web site.
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