Overdraft Fees at Banks, Are They Excessive?

WSAV News 3
July 24, 2009

The Consumer Federation of America (CFA) reports that its latest analysis of overdraft charges at the 16 biggest U.S. banks does not bode well for account holders. According to the group, financial institutions are introducing new fees and inflating existing ones while narrowing time limits to trigger fees when banks pay overdrafts and extend credit to cash-short customers. Specifically, CFA's study reveals that all of the banks studied authorize payment of overdrafts and charge a fee for each incident without the consent of customers in advance or at the time of the transaction. Ten of the 16 banks do not limit the number of overdraft fees charged on a daily basis, with the others allowing between six and 10 such fees each day. Additionally, all of the largest banks process withdrawals in the order of largest to smallest -- which increases the number of transactions that can trigger an overdraft fee, particularly for customers who live from one paycheck to the next. CFA says the amount of overdraft fees have increased in the past year at half of the banks studied, with the median now at $35. Because the Federal Reserve has not acted to protect the public from unauthorized overdrafts, the fees "are escalating and multiplying" and have cost U.S. consumers more than $17.5 billion during the current economic slump. For this reason, CFA has thrown its support behind the creation of an independent federal body dedicated to consumer protection.