Consumers beware: Banks made billions off of your mistake
Reported by Nigel Boys
Reportedly, even though federal law requires banks to give consumers the option to “opt-in” to an overdraft program, and 68 percent of consumers said they would rather have a transaction declined than to pay a fee, banks made over $34 billion in service charges during 2012.
What’s more is that overdraft or non-sufficient fund fees make up 61 percent of this astonishing figure, according to a report from The Consumer Financial Protection Bureau.
The Pew Charitable Trusts reports even though banks are getting better disclosing their checking account terms and fees, customers are still getting charged with overdraft fees, even if they can’t remember ever having consented to the overdraft service. Looking at 45 out of the 50 biggest banks in the U.S. that hold around 66 percent of all domestic deposits, Pew found that 84 percent of these establishments charge overdraft fees for ATM or debit card transactions.
More than half the people who overdrew their checking accounts in the past year didn’t remember consenting to the overdraft service, even though a 2010 federal law requires banks to provide this option to cover their purchases, according to Susan Weinstock.
The director of Consumer Banking at The Pew Charitable Trusts continues that this proves the law isn’t enough. “It doesn’t sufficiently protect consumers,” she said.
The Pew report found that the average fee charged by banks when consumers spend more than what’s available in their checking account is $35. This may be reasonable if they have opted in to the overdraft program or have purchased a large monetary value item, but what happens when a $10 meal ends up costing almost $45, be-cause they have simply gone over available amount?
What’s more, after charging an overdraft fee in the region of $35 for even a small purchase, the banks continue to charge an extended fee if that overdraft isn’t paid off within a set amount of time, making even more profit from the unwary consumer. Almost 60 percent of banks charge this extended fee, according to the Pew report.
Consumers who would like to take the option to sue a bank over its practices are now faced with the added problem of not being able to do so without following the establishment’s procedures. The report showed that 64 percent of the 45 banks in the study now have an arbitration clause which means a third party resolves the dispute.
“It’s disturbing that consumers’ options for suing over disputes are being lessened,” Weinstock said.