Tell The Feds You Want A Choice On Overdraft Fees

Tell the Feds that you don’t want your bank levying overdraft fees on you until you say, yes Mr Banky, I want to end up paying $28 for a Coke. The Feds are considering Regulation E: R-1343 and of critical concern is whether overdraft fees will be opt-out or opt-in. Obviously people shouldn’t overdraft, but what started out as a service for customers has, in some cases, turned into kicking a guy in the nuts while he’s down and taking his wallet.

Why don’t they just deny a debit charge if there’s not enough money in the account? Because then they don’t make as much money off fees.

Another one: Banks like to process checks largest to smallest instead of order received. This way they max the chances you’ll overdraw and then they can charge more overdraft fees. Since these overdraft fees are racking up on increasingly smaller items, people can end up owing the bank more in fees than they would the original merchants.

The banks want overdraft programs to be opt-out. We want it to be OPT-IN.

March 30th is the last day to send in your comments. Send an email to regs.comments@federalreserve.gov with “Docket No. R-1343″ in the subject line. Or you can use this online form.

Those pesky overdraft fees—the Fed needs to hear from you too! [DefendYourDollars]

Comments

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  1. Brawndo_The_Thirst_Mutliator says:

    I agree that OPT-IN is a better option. Does everyone still have an opt-out option currently? I’m not sure that I have one on all my accounts. What happens if you opt-out and you they try to process something? What then?

  2. QuanikaLabarixair says:

    I notice that the spam signup checkbox on the form you link to is also OPT-IN. For shame, Consumers Union.

  3. Dethzilla says:

    Yeah… nothing like paying $37.18 for a cup of Crappy Gas Station Coffee.

  4. Teresa Schmidt says:

    The problem I have is that when I use my debit card at a store, the transaction goes through even if I am overdrawn or have a deposit pending, and I would have instead used a credit card for the transaction instead of the debit card.

  5. jamesdenver says:

    If you’re going to decline a $1,000 purchase at Best Buy for lack of funds, you should also decline a $10 purchase at the grocery store for the same reason.

    I agree if I did overlook my balance I’d rather be declined, ask for another card (and look like a deadbeat to the customers behind me,) than pay a $40 fee.

    james [www.futuregringo.com]

    • Eyebrows McGee (now with double the baby!) says:

      @jamesdenver: When someone gets a card declined and I’m a spectator, my thought is usually, “Whoops, wrong card!”

      Since God knows I’ve done that — like tried to swipe a card I’d forgotten to activate (or forgotten to swipe out when it expired), or tried to swipe a card that I just bought $3,000 of plane tickets on and I *know* they’re going to freeze the card until I call ….

      Deadbeat is not the first place my mind goes.

      • oneandone says:

        @Eyebrows McGee (on Twitter: LPetelle): My cards seem to get demagnetized pretty frequently and it’s annoying, but not embarrassing. Luckily, they don’t all seem to go at the same time, so there’s always something I can pay with.

        If you really want to feel embarrassed, try paying for $10 of groceries with only dimes and nickels. At the time it seemed like a good idea – I was too lazy to go to the ATM and so proud to use all my change – that I was totally taken aback by the look of absolute pity from the cashier lady. They were in neat little stacks, too! Even the ladies with WIC checks behind me were shaking their heads and probably thinking, “poor thing.”

  6. Dyscord says:

    The banks have a habit of reordering your transactions so that the “highest amount goes first”. They also have a habit of making sure their fees go first. I made a mistake and overdrew my account once. I had written out a check and had mistakenly assumed that it would be automatically debited from my account, since that’s what I signed up for. Well that was bad enough, but when I put money that should have covered the remaining transactions, the bank took their fees out first, then the transactions went through, and then they charged more overdraft fees. I ended up having to pay over $150 in fees alone. It’s ridiculous. Remember back in the day when if you didn’t have enough money to cover something, it wouldn’t go through? Yeah…memories. The bank told me that they let things go though and order them like they do “in case something important like your mortgage has to go through”. It’s just a way access a ton of uneccessary fees.

    • SynMonger says:

      @Dyscord: So it’s just a happy coincidence for the bank that ordering transactions that way gets them the most money. Funny how that works.

  7. Imaginary says:

    It is strange that they can stop your charges when you reach a certain amount, but they won’t stop if you’re overdrawn…..

  8. Dan Sherman says:

    Shameless promotion for ING, they give you a small line of credit and charge you interest on overdrafts. I think we paid $0.37 in “overdraft” fees last year.

    • WorldHarmony says:

      @Dan Sherman: Other banks do that, but will charge you when you use your overdraft line of credit anyway. They say that the overdraft merely allows the bill to be paid. The bank still charges you an overdraft fee.

  9. SynMonger says:

    I’ve been told that this is supposed to keep me from feeling embarrassed if the funds in the account won’t cover my purchase.

    You know, I think my dignity has a price, and it’s whatever embarrassment comes my way from trying to buy stuff I don’t have the money for. I’ll sure learn how to budget after a few times of putting away groceries from the cart, or not having enough cash to cover gas.

    But that won’t make the banks any money :(

  10. HogwartsAlum says:

    I emailed my comments. With a plea for it to stop!

    Imaginary:

    It’s because they are greedy assholes!!!!

  11. FeendRendor says:

    Out of curiosity I just called my bank (Chase) to see if I could opt-out of all overdraft protection and simply have my card be denied. According to the banker I spoke to, this is impossible. Instead of the ridiculous $35 fees I formerly faced, I now have my charge card linked to the debit card. It transfers cash over to the debit card (in FIFTY DOLLAR INCREMENTS…which seems unnecessarily large to me anyway) for a low, low “service charge” of $10 per occurrence. Definitely better than before, but still not great.

    • Roclawzi says:

      @FeendRendor: I called WaMu asking the same thing, and all they told me was “Yes, you could opt-out! No, we won’t stop charging you 34 bucks for every rejection!” Part of me wanted to opt-out anyway, but then the thought of some company trying 4 times for an approval creeped into my head. I cried a little.

  12. ThatIdiotJeffrey_GitEmSteveDave says:

    As I told Chase when they said they let my gas purchase through b/c it was convenient, making the call to get the fee reversed was 10x more inconvenient.

    They then implied I might get looked down on if I was declined. I explained I worked at many a business that took CC cards, and occasionally the system goes wonky and declines a card. I would have been perfectly happy to use my OTHER Chase card to purchase the gas. I never looked any different at someone who’s card was declined. Computers and info lines fail sometimes.

  13. Dyscord says:

    One more thing though. I asked my bank about getting rid of overdraft protection and they said that OP is when you have a secondary account of line of credit to cover overdrafts. The consensus was that I can’t “turn off” overdrafts.

  14. Anonymous says:

    Stupid Bank of Satan, I mean America, once managed to rack up 700 bucks in overdrafts after I overdrew my account for, literally, three cents. By them reordering the withdrawals, I couldn’t put money in the account fast enough to keep up, so they kept making me pay 35 bucks for a cup of coffee and a donut.
    They deserve to fail. Bastards.

    Credit Unions for me now!

  15. Dyscord says:

    @SynMonger: I know. My wife was pissed off that they did this, because the teller told us that deposits made will clear the same day and should be ready for spending. They told her that “They weren’t responsible for what their employees said.” Thanks PNC.

  16. sven.kirk says:

    Call me crazy/psycho, I do not mind overdraft protection on checks.
    It is the ATM overdraft ‘protection’ that drives me insane. The bank knows if I have enough money or not. Why would the bank think that I really want to pay $xx fee to buy a coke?

  17. InThrees says:

    @undefined: That’s not a habit, Dyscord, that’s a calculated business plan to reap as many overdraft fees from as many account holders ass possible.

    The standard line is “We do that so important checks like rent or house payments don’t bounce”, but the reality is “we do that to maximize our profit.”

    If there are two things I could opt-in for at a bank, it would “pay my items in the order in which they appear” and “do not allow overdrafts.”

  18. Snarkysnake says:

    Hard to beat ING’s “paperless” checking account with a Mastercard debit card. As long as you don’t go over your credit line,they just charge you a fair,competitive rate for the time that you use the money. No fees of any kind because if the money or credit is not there,no purchase is allowed.They are not perfect,and when you do have a problem,they can be a royal pain in the azz,(pun intended),but they have won my business with this account.

  19. I_am_Awesome says:

    Those overdraft fees provide a necessary source of revenue for banks. They make free checking accounts profitable. I don’t want to have to pay for a checking account, I’d rather have it paid for by the idiots who can’t keep their finances straight. I figure I’m paying much more taxes than them, they can spot me a checking account.

  20. morganlh85 says:

    I have a credit union where overdraft is opt-IN. So if I only have $10 and try to spend $11, it simply declines my card. This has saved me a ton of money, because I’m admittedly bad at keeping track.

  21. Jeremy Nguyen says:

    i think the art for this article was done by comic artist Mark Bagley.

  22. Verucalise (Est.February2008) says:

    At least make a seperate contract that you must sign with your bank that discloses their check cashing policies in Aviary legalese form, like:

    “We will process your checks the way we see fit to maximize our profits because hey, your highest check might be your mortgage and we wouldn’t want to see that bounce, right?? We’re just doin’ you a favor, shut the hell up and pay for our generosity.”

    Flicking their testicles does come to mind….

    • mac-phisto says:

      @verucalise: being that i write disclosures for my credit union, i’m thinking of adopting your wording as is. i have a question though: is the testicle flicking opt-in or opt-out?

    • oneandone says:

      @verucalise: That’s actually one of the things that comes up in the federal register notice about this regulation (not the testicle flicking, the other thing) – overdraft fees aren’t usually covered by the Truth in Lending Act, or similar regulations. So banks don’t have to disclose the impact to you in the same ways that they have to discuss other bank services or products.

      I wasn’t aware of that, and am now very steamed about the overdraft fees. They are just shadier and shadier.

      You can read the full summary & background to the proposed regulation at http://www.regulations.gov (enter the docket number in the search) ([www.regulations.gov]). Some parts are terribly dull, but there are a lot of eye-openers. I hope the regs go through.

  23. bohemian says:

    They need to outlaw the practice of shuffling checks largest first to intentially overdraft multiple smaller items. Running debts before credits on the same day also needs to be outlawed. As far as overdraft protection you should be able to opt in or out but I want an additional option so you can have OD protection on checks written but not on debit card swipes or ATM withdrawls.

    • mac-phisto says:

      @bohemian: i unwound my debit checking from my bill-paying checking so i don’t have to worry about this. if i screw up with my debit card, my mortgage still gets paid. i think this is the best strategy. plus, to ditto Dan Sherman‘s plug, i set it up at ING to take advantage of an o/d line of credit that’s at 12%. i paid about 50¢ in interest last year with my couple screw-ups. plus, it helps me budget my weekly “mad money”. i have $X direct deposited there right from my paycheck & when it’s gone, no more lattes or happy hours for me until i get paid again.

  24. mmcnary says:

    The thing I don’t understand is how banks can say that they can debit an account on Saturday, but they can’t credit it.

    My wife overdrew her account because I transferred money from one usbank account to hers after midnight on Friday. All of the money is in usbank, it’s just being shuffled around. So I asked if I could come down to a branch and deposit cash to cover it. Nope. It is impossible to credit an account on Saturday. Unless it is a wire transfer, in which case it will credit on Saturday. My fed refund credited on a Saturday this year.

    I guess that the solution would have been to go to another bank, hand them the cash and have it wired to my account. This was a while back, and I plan better now.

  25. mac-phisto says:

    i think this is a good idea, but beware the fall-out from this. just off the top of my head, i can think of a few things that banks may do to compensate:
    1) charge a fee for declined transactions on debit cards.
    2) require that you opt-in for free checking – opting-out results in some sort of paygo structure
    3) eliminate interest on interest-bearing checking accts. when you opt-out.

    also note: whether you opt-in or opt-out, you will still be charged return fees for returned items. so whereas a bank would pay your mortgage before if you were $10 short & charge you a $34 fee, if you opt-out, you’ll still be charged a $34 fee but your mortgage will be returned (& subject to another round of returned payment & late fees on the other side).

    something to think about…

    • Rectilinear Propagation says:

      @mac-phisto:
      1) But then it only happens once instead of 5 times
      2) If you overdraft a lot this could still be cheaper
      3) Meh. That would suck.

    • johnva says:

      @mac-phisto: Yeah, I think this could seriously reduce the availability of free checking accounts, too. If it’s not profitable to them, they won’t offer it.

      Personally, although I think some of these policies are a little shady (the transaction reordering bit, for example) for the most part I don’t have a problem with the fees and I’m glad that they keep checking free for me. The great thing about OD fees is that they are totally optional.

      My method:
      1) Use credit cards for everything instead of debit cards.
      2) Pay credit cards off once a month, verifying adequate funds first.
      3) Write one check per month, verifying adequate funds first.

      With this method it’s almost impossible to OD your account under normal circumstances.

  26. nospacesinmyname says:

    you know if they just loose overdraft fees for intraday transactions none of this would matter

    • mac-phisto says:

      @nospacesinmyname: my credit union currently does this, but we’re actually contemplating adjusting the policy. if you have electronic deposits & withdrawals that come in on the sam day, we reverse fees (provided the deposit gives you sufficient funds).

      unfortunately, people abuse the policy. we have individuals that make transfers via our online teller during the day & then call expecting to have their fees waived. or they stop in later with cash/checks expecting to have fees reversed.

      folks, this is not how a checking account works. the idea is that you put your money in first & then pay bills – you don’t do the opposite. if you have the cash, or the money in another account, transfer it before you pay out.

  27. Anonymous says:

    I just sent my email to KEEP THE SYSTEM THE WAY IT IS. Let me explain why. If people are going to write bad checks, and they will no matter what the bank does or doesn’t charge, then the small business and all actually all businesses are going to have those bounced checks that NEVER get funded. So they will have to go up on the price everything to cover the bounced, non-funded, checks. That means that people like myself that are smart enough to not spend money that I don’t have will pay for the bounced checks of the people that arent smart enough to subtract and add… Simple way to beat the system is to not bounce a check. I love how this article makes it sound like we will all bounce a check next week! Also, do you realize that you can be arrested for writing bad checks! But only if you don’t have overdraft protection. Cancel your overdraft protection then bounce a check… then get a warrant for your arrest. Then see how thrifty you feel.

  28. Craig Hermann says:

    Just like a few people have noted about ING, I have a U.S. Bank account that has a credit line of $500.00 attached, so if I overdraft, I just have to pay the overdraft amount plus a reasonable interest rate back to the credit line.

    I opened the new account after my old one had to be closed due to someone in France apparently trying to access my account at an ATM (I live in Missouri), but with my old account I was able to experience the pain of paying a $33 fee for buying a $1.00 soda after I had overdrafted.

  29. calchip says:

    Little known fact: Banks are REQUIRED BY LAW to allow you to “turn off” overdrafting of your account via debit cards. It’s even been written about before on Consumerist. But the banks will do everything possible to convince you the option doesn’t exist, or to tell you tales of woe and horror that will occur should you wish to exercise this option.

    At the evil Bank of America, this option is called “Pay No NSF” and I had to go through about 10 reps before I found one who knew what it was (or was willing to admit to its existence when I didn’t know the correct name for it.)

    Interesting side effect: Since we’ve had Pay No NSF turned on for all of our accounts, all of the sudden our transactions are clearing a LOT faster. With Pay No NSF turned off, it looked like they were intentionally holding transactions for 2 or 3 days, waiting until there was an overdraft, and then clearing all items that day. Now we have it turned off, things clear very quickly, no more 7 day “pending” transactions.

    Shady as heck, but considering they are about to fold, it’s not surprising they are doing everything possible to bleed every last dollar out of everyone before they go away or are taken over by taxpayers.

  30. nybiker says:

    @QuanikaLabarixair: Yeah, that opt-out ‘bug’ kept me from using the form. You would think they’d know about that kinda crap.

  31. nybiker says:

    For those of you signing the praises of the new york city marathon title sponsor, I respectfully disagree just on principle.

    I wish they hadn’t played the naming rights game, so that I could check out their services. Cutting off my nose to spite my face, well, let’s just say my nose is getting smaller by the day.

    /just my opinion, I could be wrong.

    and for the record, reply function is still not working and preview button is nowhere to be seen. If it helps with the diagnosis, I am using Opera 9.64 and have it set to identify itself as IE.

  32. XianZomby says:

    My buddy that used to live with me, he’s not exactly wealthy; last year he made about $10,000. Of that, about $1,000+ went to overdraft fees at Bank of America. Some weeks, his account would be $300 in the hole, and when his paycheck would come in via direct deposit, he’d be left with $30 in his account. That’s pretty depressing for a young man who worked as hard as he did at a crappy job.

    Before ATMs, direct deposit, and automatic bill pay from your checking account, it was easy to know what money you had in your account. The only way to get money out was to go to the bank and get cash, or to write a check. So you could keep a running total on your checkbook register and expect it was accurate. Now, they pull money out of your account at random times (three or four day windows for each auto pay you have) and with the ATM, you get varying fees based on who owns the machine. The only way to really know what’s in your account now is to log on to your account through your bank’s Web site. Even the ATMs and the automatic balance notices to your cell phone via SMS won’t tell you an accurate number, because they don’t report pending transactions.

    For my friend, BOA would even let him get cash from the ATM when his account was already negative. You’d think a bank would warn you that you have no money. Instead, they give it to him and charge him $35 dollars. That’s not being a customer friendly bank, that’s screwing you over. This isn’t a guy that was spending money on TVs, computer games and alcohol. This is a guy whose whole paycheck was consumed by a phone bill, food and cigarettes. A pack of $4.00 cigarettes would sometimes end up costing him nearly $40.00.

    Yeah, BOA and other banks need to tell you that you have no money before offering you the option of spending with an expensive service fee. Every time you use a debit card, your bank should do a check on your available funds and decline a transaction based on your balance. Because short of logging in to your account via the Web every day, there’s no way to really know what’s in that account anymore.

  33. Jfielder says:

    I myself have thoroughly enjoyed a pack of 35 dollar gum. YUM!

  34. David Anderson says:

    I used to get hammered with these fees from BofA and could never get an answer as to why I was being allowed to make purchases when there was no money in the account. I was told that, when I used my debit card, purchases wouldn’t clear from a merchant immediately. So while my balance looked like it was in the black, it wasn’t.
    Eventually, I was told that the only way to make sure this didn’t happen would be to use my PIN whenever I made a purchase, because those transactions cleared immediately. I ditched the Visa logo, and got an ATM card instead.
    I swore to myself that I would never give BofA any more money than I needed to. Instead of using my card at a merchant, I pay for everything in cash. When I can, I get my cash directly from a teller. When I can’t get to a bank, I make sure to use BofA ATMs so I never pay ATM fees.
    They did finally get me last month for three bucks when I made more than three transfers from my savings account to checking. I learned my lesson. Now I directly withdraw money from savings and immediately deposit it into checking.
    Screw BofA, I’d be happy to see them fail. Well, as long as I can get my money out first.

  35. oneandone says:

    There’s something very interesting in the Federal Register Notice about the propsed regulations – apparently, last year (May 2008) the FTC proposed requiring banks to offer an opt-out of overdraft services, and the banks made a big hullabalo about how forcing them to offer opt-out would be terrible for customers.

    From the notice, regarding 2008’s opt-out rule:
    Industry commenters asserted that consumers derive substantial benefit from overdraft services, particularly in connection with check transactions.
    While institutions generally assess the same fee whether a check is paid or returned, industry commenters observed that the payment of overdrafts for
    checks enables consumers to avoid other adverse consequences, such as merchant fees, the furnishing of
    negative information for credit reports, and violations of bad check laws. … Industry commenters also asserted
    that consumers may not fully understand the implications of opting out, and that those who elect to do so might unintentionally incur significant costs. … consumers may experience a longer waiting period before gaining access to deposited funds than currently is the case today.

    It bothers me that their whole argument is that removing overdraft fees – or even letting people opt out of them – is bad for the consumer, when it’s really their abuse of the system that’s bad for the consumer. And all the posturing leads to some weird contradictions, like when the banks stated that if they had to inform people that they can opt out of overdraft ‘services’ they should only have to do it once (at the initial opening of the account) and not issue a reminder after someone overdrafts and has to pay a fee. their rationale? Providing a reminder that you can opt out of the fees would be too confusing for customers. Bullshit.

    And this is all regarding opt-out. I can see why they’re flipping out about the opt-in.

    The notice is here: ([www.regulations.gov])

  36. Anonymous says:

    I believe that overdraft should be an OPT-IN service, this would prevent banks from abusing consumers. In addition to preventing banks from abusing it’s customers, all the time and effort they spend creatively processing transactions in order to maximize overdraft fees could be better spent elsewhere. I would go one step further an say banks should be required by law to process transactions in chronological order but I guess we need to take baby steps first.

  37. Bs Baldwin says:

    Ha ha. Hey my employer doesn’t pull this crap, and for some reason people will stay with the crappy bank that does. Oh and we don’t charge you to use your card or count coin. And that sub-prime mess, not involved.

  38. Brent says:

    Done. Thanks so much for posting this.

  39. Anonymous says:

    There should be a charge but not outrageous. It does sometime happen when you were to get money in and some unforeseen thing happens. Some banks are willing to listen to you.