The Federal Reserve will prohibit banks from charging overdraft fees on automated teller machines or debit cards, unless a customer has agreed to pay extra charges for exceeding account balances. Financial companies will have to explain overdraft programs and fees, as well as choices available to consumers, the Fed said today in a statement announcing a rule that takes effect next year.
The rule comes after Fed research indicated that consumers don’t like to be automatically enrolled in overdraft protection programs. Of course, most consumers don’t even know they’ve been enrolled until they get hit with a fee after overdrawing their accounts. More at Bloomberg.
(Hat tip: Mort Goldman.)
Addendum: The new default rule won’t apply to old fashioned checks or regularly recurring debits from checking accounts. As more and more people pay their cable, phone, and utility bills automatically and electronically, a new round of debate about the default rule may still be ahead.
Tags: bank, default rules
November 14, 2009 at 7:39 am |
So… it’s better to have consumers unable to draw money when they need it? This is supposed to be a better default why?
November 14, 2009 at 7:04 pm |
Thorfinn, the question is about consent and (implicitly) informing. The service will still be there. Hell, once out in the open banks might even compete on the fees.
Anecdote: My idiot brother-in-law paid $25 per transaction (extra) for about 15 days before he got his statement. Bill comes, he finds out he’s overdrawn, sucks to be him, sucks to be stupid. Like $600 in fees in just two weeks. I would further advocate that there should be a mandatory robo-call informing customers every time such a fee has been assessed.
A good rule of thumb is that it’s predatory if you wouldn’t do it to your brother-in-law.