Curbing overdraft practices is as vital as card reform, Maloney says, because "especially during this economic downturn, Americans want and deserve greater control over their finances."
The Federal Reserve is weighing whether to crack down on automatic overdraft protection. But advocates say a Fed rule — expected later this year — won't tackle the worse abuses.
The agency's proposed rule, for instance, doesn't cap overdraft fees, require banks to disclose the overdraft interest rate or prevent them from "manipulating" the order of checks and debits to maximize overdraft fees, says Jean Ann Fox of the Consumer Federation of America.
The question the government needs to answer in weighing reform, says Peter Tufano, a senior associate dean at Harvard Business School, is "if fees help banks improve their financial health but weaken consumers' financial health, is this a net good or bad for the economy?"
Tufano says banks should be able to come up with business models that deliver sustainable profits without hurting consumers.
Overdraft fees aren't the only ones rising.
ATM fees, monthly service fees and balance requirements for interest checking accounts all hit highs in 2008, before adjusting for inflation, according to Bankrate.com, a bank comparison site. Even after inflation adjustments, ATM fees are at record levels.
In 2009, consumers should expect more of the same. Says Greg McBride, senior analyst at Bankrate.com, "A lot of these fees will continue to march higher as long as the sun rises in the East."
Bank of America, the nation's largest bank based on assets, is raising some account fees because of the bank's higher costs and consumers' increased riskiness, spokesman James Pierpoint says.
In June, Bank of America will increase its monthly account-maintenance fee on its MyAccess checking to $8.95 from $5.95. The bank will also begin charging a one-time fee of $35 if consumers' accounts remain overdrawn for five business days. And it has increased the number of times customers can get hit with overdraft fees per day to 10 this year, from five last year.
Wachovia is doubling — to $10 — the fee to transfer money to checking to cover insufficient funds on some accounts. The bank will also start charging that fee to a credit card, rather than taking it from a linked bank account, meaning consumers could pay interest on that amount.
Michael McCoy, a Wachovia spokesman, says the fee increase is an attempt to assess the same, "consistent fee" across multiple accounts.
But Stephen Lerner, assistant to the president of the Service Employees International Union, which has 2 million members, says that checking accounts have increasingly become "the gateway to a cycle of never-ending debt."
"Banks lure you in," he says, "and then do everything they can to attach fees."
Some new bank fees are strikingly similar to those that have already taken hold on credit cards. For instance, SunTrust began charging in May a higher fee on its basic checking if customers overdraw multiple times — similar to what banks have done with late fees on credit cards. The bank also raised its overdraft fee on other bank accounts. SunTrust says its changes are "consumer friendly." Despite higher overdraft fees on premier accounts, the bank will automatically waive one to three overdraft charges a year on these accounts, spokesman Hugh Suhr says.