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Other Federal Bank Regulators Should Follow the FDIC’s Leadership in Curbing Overdraft Fee Abuses

Wednesday, November 24, 2010

Statement by CRL President Mike Calhoun:

"Today the Federal Deposit Insurance Corp. set a standard other regulators should follow when it issued guidelines advising banks to stop reordering transactions to maximize overdraft fees, particularly on debit cards.

Unfair transaction posting—especially the practice of reordering checks and debit card transactions to deduct the largest checks and charges first—significantly increases the number of overdraft fees customers are charged. Customers are charged a separate fee—usually about $35 per item-for each charge that is posted to an overdrawn account. By posting the largest items first, the balance dips below zero sooner, and each subsequent, often small transaction, triggers a fee.

This unfair practice, common among the nation's largest banks, was the reason a federal judge earlier this year ordered Wells Fargo to pay back customers over $200 million. The FDIC's guidance applies only to the state-chartered banks the FDIC supervises, not to the nation's largest banks. The Office of the Comptroller of the Currency and the Federal Reserve Board, who have authority over the largest banks, should follow the FDIC's lead and apply these common-sense, fair guidelines to all banks. It's remarkable that the OCC and FED have so far chosen not to stand shoulder to shoulder with the FDIC on this issue.

Another important aspect of the FDIC's new guidance is that it recognizes that overdraft fees of more than six a year are excessive and directs banks to contact customers in this situation to offer cheaper, better alternatives. It also cautions against 'inappropriate efforts to coerce customers to opt-in' to programs with high overdraft fees. The FDIC notes that targeting customers who may be least able to afford such fees could violate fair lending laws and pose a threat to the safety and soundness of the banking system."

For more information about debit card overdraft charges, please visit

For more information: Kathleen Day at (202) 349-1871 or; Ginna Green at (510) 379-5513 or; or Charlene Crowell at (919) 313-8523 or