The notion behind an overdraft fee — in which a bank customer is charged a penalty for overdrafting his account — is twofold: To incentivize consumers to pay attention to how much money is in their accounts, and to allow the bank to recoup any money it lost by covering the overage. But a new report claims that these fees have become such a profit center for banks that it’s now in their interest to push account-holders with low-balance bank accounts toward overdrafting.

According to a newly released white paper [PDF] from the National Consumer Law Center, banks brought in $29.5 billion in overdraft fees in 2011 alone (a recent study showed that number increased to $32 billion in 2012). Given that the median fee is now around $35, while the actual cost to the bank for processing the overdraft is anywhere from a few cents to a few dollars, a large portion of those billions is profit.

The NCLC also found that the median debit card overdraft is only $20, while the median amount for all overdrawn transactions is $36. Thus, in many cases, the fee is larger than the amount being overdrafted.

In recent years, a some of the larger banks have made no secret of the fact that the average checking account-holder is not a source of profits, and have tried to institute things like monthly fees for debit cards, a number of which have resulted in public backlash.

Meanwhile, the NCLC says banks have realized the potential for profit in customers with accounts on the brink of overdraft, instituting systems that make it easier for these consumers to cross that threshold.

Such changes include the extending of overdrafts to debit and ATM card transactions. Previously, the standard had been to not allow customers to cross into overdraft territory in this way. Then there’s everyone’s favorite — re-ordering transactions so that the purchases with the highest dollar amounts are processed first, thus making it more likely to push the customer across the overdraft threshold. Additionally, since some banks charge a fee per transaction, each of the smaller overdrafts results in a separate $35 fee.

Congresswoman Carolyn Maloney introduced legislation in March to address this and other issues regarding bank overdraft fees, but the NCLC believes that the federal Consumer Financial Protection Bureau has the authority under the CARD Act to rein in these fees.

The Act requires that credit card fees and penalties be “reasonable and proportional” to the violation for which they are imposed, but this regulation is not placed on debit transactions.

“The CFPB now has authority to issue regulations to interpret the Credit CARD Act,” explains the NCLC. “The CFPB could apply the reasonable and proportional standard to overdrafts accessed by debit cards by treating them as ‘credit cards.'”

In the broader picture, the NCLC holds that the CFPB could use its consumer protection authority to rein in overdraft fees, regardless of whether or not a debit card is involved.

“There seems no better use of the CPFB’s power to ban unfair, deceptive, and abusive acts than to restore a centuries-old doctrine that still protects businesses – the more sophisticated and powerful entities – but not consumers,” writes the NCLC.

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