05/08/2012 - Nearly two years after the Federal Reserve began requiring banks to get customers’ permission before subjecting them to controversial overdraft practices, many account-holders are still surprised when they are charged overdraft fees for debit-card purchases or ATM withdrawals that could simply have been declined, says a new study financed by the Pew Charitable Trusts.
The Pew study found that more than half of those hit with overdraft fees did not believe they had opted in to the policies, which enable banks to approve purchases or withdrawals for customers short of funds and then charge them fees for the transactions. Pew says the median bank overdraft fee is about $35.
Pew has focused on unexpected overdraft fees as part of its Safe Checking in the Electronic Age Project, which says the fees pose financial risk, particularly to younger and less-affluent customers.
Many of the 606 respondents who had paid an overdraft fee did not understand key aspects of their banks’ policies, said Susan K. Weinstock, director of the Pew checking project.
“The big point that jumped out at me is that there is so much consumer confusion about this service,” Weinstock said in an interview Monday. “Seventy-five percent of overdrafters would prefer to have a transaction declined rather than have it go through and pay the $35 fee.”
Weinstock said confusion was magnified by banks’ nomenclature for the programs, which the Federal Reserve allows them to present as their “standard overdraft practices.”
“Different banks call it different names,” she said. “Some call it ‘overdraft protection,’ some call it ‘bounce protection.’” More than a third of the overdrafters surveyed “did not know they had overdraft coverage until after they incurred a penalty,” the study found.
Read the full article, Pew Study: Overdraft Fees Still Take Account-Holders by Surprise, on the Philadelphia Inquirer's website.