Expensive and complicated overdraft fees are pretty high on, if not at the top of, many bank customers’ complaint lists. So it only makes sense that the newly formed Consumer Financial Protection Bureau has decided to look into whether or not these fees are a fair way to keep people from overdrafting, or just a profit center for banks.

CFPB is set to announce today that it will be requesting information from banks on how they market overdraft fees and disclose the terms and conditions of these fees.

“Overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it,” CFPB Director Richard Cordray said in a statement. “We want to learn how consumers are affected, and how well they are able to anticipate and avoid paying penalty fees.”

Now that bank customers must opt-in to overdraft protection, banks have reacted by increased marketing, raised fee levels and interest rates, and by re-ordering each day’s transactions in such a way so as to increase the odds of triggering an overdraft fee.

CFPB head Richard Cordray will go into detail about the regulator’s plans during a live press conference at 11:00 a.m. ET., but according to the Associated Press, the areas of focus will be:

* The reordering of transactions in ways that increase costs to consumers.

* Missing or confusing information. The agency wants to make sure people understand how they can avoid overdraft fees. It will look at how the fees are disclosed and what other options are presented.

* Misleading marketing. The number of people who choose overdraft protection varies widely from bank to bank, the CFPB noted. It wants to know how marketing affects people’s decisions. The Center for Responsible Lending report noted several examples of misleading or threatening language in banks’ marketing materials.

* Disproportionate impact on low-income and young consumers. According to a 2008 study by the Federal Deposit Insurance Corp., 9 percent of checking accounts incur 84 percent of overdraft fees. The study found that nearly half of younger cardholders paid the fees.

We’ll have to wait until after the CFPB completes its probe before we see any new proposed regulations or rules that would curb or at least clarify overdraft fees.

Consumer-finance watchdog probes overdraft fees [SFgate.com]

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