The CFBP is investigating a number of areas when it comes to overdraft fees.
There was such an uproar over it that federal banking regulators instituted new rules, forcing many banks to alter their policies on overdrafts and requiring them to get a customer's consent to overdraft protection instead of automatically offering it.
Recently, a new reader who discovered Consumerism Commentary due to my multi-year coverage of Bank of America (primarily the articles pertaining to the overdraft fee class-action lawsuit), wanted to share a cautionary tale about the same bank.
Many banks offer an overdraft protection program that either draws funds from your savings automatically or links to an overdraft line of credit.
In a harshly worded decision issued late Tuesday afternoon, a federal judge in California ruled that Wells Fargo deliberately manipulated customer transactions in order to trigger overdraft fees.
Regulators are also trying to write the final rules that will limit how much banks may charge when retailers swipe debit cards, as well as restricting banks' ability to levy overdraft and other fees on current accounts.
Consumer advocates have criticized banks for playing games with customer accounts, like manipulating activity to levy overdraft penalties on the maximum number of small transactions, and then increasing them based on how long it takes for a deposit to post to an account.
Congress will get another chance to limit checking account overdraft fees that continue to annoy customers and produce billions of dollars in revenue each year for banks and credit unions.
There are no schemes to try to overcharge on overdraft by reordering the accounting process, but rather a live person will usually call you to say that your account has been overdrawn, and how we can help.
To protect yourself from overdraft fees and bounced payments, you want to keep both accounts open at the same time for at least a month, with enough money in each to cover any payments that come in.
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In other words, if banks lose income by being forced to reduce their overdraft charges then they may recoup the money by putting up charges for customers who currently do not pay anything at all.
In addition to regularly monitoring your checking account, try to keep a buffer of cash in there to help prevent overdraft charges or even cancel the overdraft feature altogether (although you may run the risk of late fees from billers if you miss a payment due to insufficient funds).
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That led a number of banks to launch aggressive campaigns to convince customers to sign up for overdraft protection.
Before these new rules, most banks automatically added courtesy overdraft protection to checking accounts with details and fees in the fine print.
At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills.
JPMorgan Chase, Wells Fargo, PNC, Bank of America, and five other banks are currently under investigation for persuading customers to opt into expensive overdraft-protection programs without always being made aware of cheaper alternatives.
Should banks be allowed to automatically enroll customers into overdraft protection programs?
Some consumers were dropped by their banks while others say they avoid the traditional banking system owing to concerns about fees and overdraft charges.
The bank added that is it "totally transparent" in its charges and says any customer who "habitually uses" an overdraft facility is encouraged to find an alternative.
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Blame it on regulation, banks have had to strike back with rule changes that impact how they can charge overdraft fees, as well as how much they can get from fees related to debit-card swipe fees.
Some think the overdraft overhaul might encourage banks to dabble in areas currently the domain of such non-banks as check-cashing stores.
Starting this year, banks now have to get customers' permission before charging them overdraft.
By contrast, the other banks include undrawn overdraft facilities in their Merlin numbers to a greater or lesser extent.
Over the last year, banks have complained about losing significant revenue due to financial reforms, especially on limitations in overdraft fees on debit cards.
More seriously perhaps, Royal Bank of Scotland - by far the biggest lender to small businesses - does not include undrawn overdraft facilities in its Merlin data.
Some banks are still generating overdraft fees by posting transactions from highest to lowest dollar amount, rather than in the order they occurred.
Overdraft fees are charged by banks when customers try to spend more money than they have in their checking account.
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