Days of overdraft “favors” are done

By Flickr user Tark Siala

Bloomberg News reported, banks aren’t doing anyone a “favor,” when they charge fees as high as $39 on debit-card transactions that overdraw a consumer’s account, said House Financial Services Committee Chairman Barney Frank.

The Federal Reserve finally put a halt to these shoddy business practices Thursday. Under the new rules, banks must get consumers’ permission before charging for overdrafts at retail stores or A.T.M’s.

The new rules will not cover overdraft fees for checks, or recurring debit card transactions, like payments for utility bills that are set up in advance.

The new rules will be implemented as soon as July 1, 2010.

The New York Times reports that industry executives say the new restrictions are far too harsh. The paper also had an excellent chart that showed how exponentially debit fees have gone up in the last few years.

Federal officials said that the banking industry received between $25 billion and $38 billion a year in overdraft fees.

Some raised the alarm that with the Fed clamping down on banks, they will be forced to make up the losses by charging consumers for savings and checking accounts.

Officials hope that the new rules will help prevent hidden fees, and make the overdraft conditions clearer for consumers.