The Federal Reserve has responded to a wave of consumer complaints over unrestricted debit card fees by making it more difficult for banks to charge certain overdraft fees.
In new Fed rules announced today, financial institutions are prohibited from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.
In addition, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices – before the consumer opts in.
“The final overdraft rules represent an important step forward in consumer protection,” said Fed Chairman Ben S. Bernanke. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”
The new rules also prohibit financial institutions from discriminating against consumers who do not opt in. Those consumers must be provided with the same account terms, conditions and pricing that the banks provide to consumers who do opt in. For onsumers who do not opt in, a bank cannot charge overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.
“Overdraft fees can be costly,” said Governor Elizabeth A. Duke, the chair of the Board’s Committee on Consumer and Community Affairs. “Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs.”
In recent weeks, three of the largest U.S. banks have already changed their debit card rules by lowering or eliminating fees and giving customers more options. They were responding to complaints of excessive overdraft fees from consumers, legislators and even disgruntled customers on venting their anger on highly-visited YouTube videos.
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