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Federal Reserve issues new rule - Banks must get customer approval for overdraft fees

2009-11-13 05:52:19 (GMT) (Caymanmama.com - Banks & Banking Government News)

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Federal Reserve and banking rules

Phoenix, Arizona (CaymanMama.com) — According to a new rule announced by the Federal Reserve on Friday, banks must now obtain consent from their customers before charging hefty overdraft fees from ATM and debit card transactions.

For a while now, consumer groups, Congress members and other regulators have complained that the fees banks impose for overdrafts are unfair because most consumers know they are unable to spend more on a debit card than they actually have available to spend.

On the contrary, many banks allow the transactions to run without declining the card, then charge fees of up to $25 to $35.

In many cases, the consumer made a small dollar purchase, like a cup of coffee or candy at a convenient store, and then they are smacked with a a fee that far exceeds the actual cost of the purchase.

According to the AP, “Under the Fed’s new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don’t ‘opt in,’ any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.”

The nation’s banking institutions pocket between $25 billion to $38 billion every year from overdraft fees, Fed officials said, including check overdrafts.



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