November 13, 2009
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News: Feds Play Hardball With Banks
The Feds are playing hardball. On Thursday, the Federal Reserve finalized a rule that will require banks and credit unions from approving debit card overdrafts and charging large fees. An increasing number of consumers have switched from credit card to debit card and have discovered the cash card has generated even steeper deceptive fees than previously experienced with their credit card account. There just doesn't seem to be any escaping the cruel and greedy hands of the financial industry. The Feds say there is and the new rule will regulate banks' overdraft practices. Of course, as with the credit card reform act, banks have been given nine months to prepare for the enactment of the new rule which if very concerning for many consumers.
Not that they didn't have enough to worry about with the deceptive and unfair practices of the credit card industry, switching to debit card brought even greater heartache when Americans discovered the predatory actions of their banks. Americans were outraged by the banking industry's modification of posting standards of more than one item that was submitted for payment in a single day. The practice of posting the highest dollar amount first would often throw four, five, or six items into an overdraft situation. Instead of paying a $35 over-the-limit fee on their credit card account, consumers found themselves paying $70 plus in overdraft fees. Consumers who complained said they were charged $35 for each item and in a many instances the items were $10 or less.
Results from a USA TODAY study, indicated that overdraft fees have become the number one profit bearing fee. They expect the banking industry will bring in more than $38 billion from overdraft and insufficient funds fees in the year 2009; twice the amount forecasted for credit card penalties. The new rules could change all that for the 2010. Under the terms of the new rule, banks are required to provide overdraft protection options to Americans; however, before doing so they will need to get the customer's permission. No doubt, most consumers support the rule; however, many could be caught off guard if that debit card transaction gets rejected at the POS.