Overdraft Overhaul Ahead

Santa Rosa Press Democrat
March 14, 2010
Halverson, Nathan

New federal regulations, which take effect on July 1 and apply to existing customers starting on Aug. 15, prevent banks and credit unions from processing debit or ATM transactions unless underlying accounts have sufficient funds or the account holder has authorized such transactions. Consumer advocates widely support the decision, while banks attempt to discern the best ways to recover their potential loss of billions in income. Approximately 93 percent of overdraft fees result from only 14 percent of bank customers, and 68 percent of the fees come from only 5 percent of customers. Some banks, such as Exchange Bank in California's Sonoma County, may get rid of free checking in an effort to protect profitability. Ginna Green, a spokeswoman for the Center for Responsible Lending, is not concerned about the loss of free checking and said, "Consumers aren't looking for a free ride, they are looking for a fair ride. I think when fees and costs are upfront, consumers are happy." Bank of America and Citibank have abolished overdraft charges altogether and are not providing opt-in programs for customers, whereas Chase has begun a campaign to encourage customers to enroll in a voluntary overdraft protection program. The new rules do not apply to under-funded checks, which banks and credit unions can still process without the permission of customers.