Banks will have to secure their customers’ consent before charging large overdraft fees on ATM and debit card transactions, according to a new consumer protection rule which will take effect July 1, announced Thursday by the Federal Reserve. The rule responds to complaints from consumer groups, member of Congress and other regulators that the overdraft fees are unfair because many people assume they can’t spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.
For small purchases, the penalty can exceed the actual cost of the transaction.
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. If a consumer wants checks and regular electronic bill payments to be covered in the event of an overdraft, those transactions aren’t covered by the rule.
Richard J. Arsenault, 2011
