Fed to Curb Banks Overdraft Fees
The Fed announces rules that allow consumers to opt out of bank overdraft fees.
Nov. 12, 2009 — -- The Federal Reserve today announced new rules that will ban banks from charging overdraft fees on debit card and ATM transactions unless a consumer opts in to an overdraft program.
"The final overdraft rules represent an important step forward in consumer protection," Fed Chairman Ben Bernanke said in a statement. "Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."
Overdraft fees can result in consumers being charged up to $35 for withdrawing more money than they have in their accounts. Under the Fed's rules, all consumers -- including existing account-holders -- would have the choice to sign up for overdraft services.
If customers choose to opt out of the overdraft programs, purchases for dollar amounts greater than their account balances will be denied.
The rules do not apply to overdrafts incurred by checks. The Fed conducted testing that showed that most consumers want coverage for checks but do not want to be enrolled in overdraft programs for debit card and ATM transactions.
The new rules will take effect on July 1.
The Fed's actions come as the central bank fights to maintain its consumer protection responsibilities.
Earlier this week Democrats on the Senate Banking Committee unveiled draft legislation that would strip the Fed of many consumer protection duties and create a new agency to handle these issues.
Fed officials today denied that the recent events on Capitol Hill have influenced the introduction of these new rules.
Both the Fed and Congress have taken aim at banks charging overdraft fees without consumers first having the option to participate in such a program.
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