New Overdraft Regulations go Into Effect Soon

Banks are making sure their customers know of the opt-in rules that the Federal Reserve Board has instituted for overdraft fees. By now you’ve probably received a letter in the mail or an e-mail in your inbox from your banking institution alerting you to the changes going on in the financial world. New Federal guidelines go into affect July 1st regarding the way banks charge for overdraft fees on checking accounts.

Consumers who overdrew their accounts in the past were facing an initial fee of around $20 – $30 in addition to possible daily or weekly fees if the account balance remained zero. The Federal Reserve Board’s new rules prevent banks from penalizing customers when they pay overdrafts on ATMs and “one-time transactions” with debit cards except if the customer agrees to their bank’s overdraft program. Now customers must be given the chance to opt-in to their bank’s overdraft protection programs or choose to have purchases declined if their account is overdrawn.

The benefit to people who enroll in the overdraft protection is that their purchases won’t be declined in case their account runs low but they’ve got to pay the small business banking fees. If customers don’t opt-in, they might not have to pay fees since their bank doesn’t have to cover their purchases other than recurring transactions like automatic bill payments for utilities or mortgage bills. Good Federal Reserve Board, “the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees linked to the service, and the consumer’s choices.” This is an effort to help consumers be well-informed about the way their banking account works. While paying daily or weekly penalties or fees that are disproportionate to the amount charged is excessive and should be monitored, there must also be some form of accountability for consumers who overspend, and financial institutions are within their rights to set the terms of these fees.

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