Overdraft fees up 35% in two years
Consumers’ suspicions have been confirmed.
The $24 billion in overdraft fees that banks and credit unions collected during 2008 is a 35 percent increase over 2006.
The Center for Responsible Lending released results of a study today, showing that more than 50 million Americans were overdrawn on their checking accounts during a 12-month period, and 27 million accountholders incurred five or more overdraft or non-sufficient funds fees.
CRL Senior Researcher Leslie Parrish said that because of banks and credit unions sophistication in driving up overdrafts fees, “Americans now pay more in overdraft fees every year than they do for books, cereal or fresh vegetables.”
The Center’s suggestions for reform include:
- Require that institutions deny debit card purchases and ATM withdrawals, without charge, if the funds aren’t there. As a limited exception, an overdraft fee could be charged if the lender gives the customer a real-time warning and chance to decline.
- Require that overdraft fees bear some relationship to a lender’s cost of covering a shortfall.
- Limit the number of fees that can be charged to a customer during a year before the institution must enroll the customer in a reasonably priced overdraft product, such as a line of credit, if it wants to keep charging for overdrafts.
- Consolidate and streamline existing federal consumer protection authority by housing it in one organization: the proposed Consumer Financial Protection Agency, which would focus solely on what’s in the best interest of consumers.
To read the full report, visit the Center for Responsible Lending Web site.