If you’re confused by your bank’s overdraft penalty rules, you’ve got some company. Confusion surrounding overdraft penalties is exactly why financial institutions are required to make sure their customers confirm their consent before they are enrolled in an overdraft penalty plan (this has been in effect since 2010).
However, a recent report by Pew Charitable Trusts finds that more than 50% of consumers who incurred overdraft penalty fees over the past 12 months don’t remember agreeing to opt in. The Pew Charitable Trusts says many consumers are in the dark when it comes to rules governing overdraft penalty plans as well as overall bank fees and practices. Consequently, consumer advocates are calling for federal regulators to improve overdraft policies. Pew and the Consumer Financial Protection Bureau agree that the overdraft has become big business for many banks.
The CFPB says that overdraft lines of credit have gone from “a manual courtesy program to an automated feature that today generates a significant share of financial institutions’ revenue from deposit accounts.â€
Says the Pew Charitable Trusts, “In fact, according to one estimate, financial institutions collected $16.7 billion in overdraft fees for 2011, at least $5.8 billion of which was triggered specifically by a debit card purchase or ATM withdrawal. Another estimate projected $32 billion in overdraft and insufficient funds revenue in 2012.â€ Some of the Pew Charitable Trust survey findings:
- Younger, lower-income, and nonwhite account holders, as well as those who did not have a credit card, are among those who were more likely to pay an overdraft penalty.
- More than half of those who incurred a debit card overdraft penalty fee do not believe that they opted in to overdraft coverage.
- Ten percent of Americans paid at least one overdraft penalty fee in 2013, and another 5% paid an overdraft transfer fee.
- On average, people who paid an overdraft penalty also incurred additional fees, for a total of $69 the last time their account was overdrawn.