Overdraft protection policies can be costly; bill seeks limits

Akron Beacon Journal – Last month, three big national banks announced changes to their overdraft protection policies, saying they would end fees on accounts that are short by $5 and $10 and put a cap on the number of overdraft charges.

Overdraft protection policies are designed to help cover checks that would otherwise bounce. Bank officials say they offer the programs in order to protect consumers from unpaid bills and to help avoid the embarrassment of a check being returned for insufficient funds. But consumers have often complained about what they call excessive fees.

The practices have caught the attention of Congress.

Four senators, including Sherrod Brown of Ohio, introduced a bill called the Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act. Similar legislation was also introduced in the U.S. House.

Items included in the proposed bill:

• Require banks to get a customer's consent before enrolling them in an overdraft protection program for ATM and debit-card transactions.
• Limit the number of overdraft charges a bank can charge to one per month and six per year.
• Require fees to be proportional to the cost of processing the overdraft.
• Stop institutions from manipulating the order in which they post transactions, a practice that bank critics say allows them to rack up extra fees.
• Require customers to be notified when they overdraw their account.
• Require that customers be warned and have the opportunity to cancel an order if an ATM or branch teller transaction will overdraw their account.

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