The rules and regulations for overdraft fees and what banks are legally allowed to charge its customers for insufficient funds are tenuous at best and have rarely been in favor of the consumer. Overdraft fees are regulated by the Federal Reserve, who recently announced changes with regards to what banks are allowed to charge, and specifically to one-time ATM overdrafts.
"The final overdraft rules represent an important step forward in consumer protection," said Federal Reserve Chairman Ben S. Bernanke in a statement to the media.
What are the New Overdraft Coverage Guidelines?
Previously, banks could elect to give their customers free Overdraft Protection. Most banks opted into this and would essentially pay out checks even when their were insufficient funds to do so, and then charge the customer a hefty 'Overdraft Protection' fee.
Consumers will now have the right to opt out of this automatic Overdraft Protection if they so desire. The bad news? Opting out does not mean that the charge will necessarily go away. Rather, the bank will maintain the right to charge an 'insufficient funds' fee, leaving some to cry out "Tomatoes, Tomatohs."
New Overdraft Regulations - Rules and Benefits
Possibly the only positive advantage for the consumer regarding the new regulations are the debit card guidelines. Previously, a majority of surprise overdraft protection charges came from the bank authorizing a debit when there was not enough money in the account to cover it. The bank then had the right to charge a fee for that convenience, often when it was a matter of pennies in question.
Banks will now be required to have their customers opt in for this protection rather than automatically providing it as a service. Refusing to opt in ensures that if there is not enough money in the bank account to cover a charge or debit from an ATM, then the transaction will not go through thus ensuring that a hefty 35.00 fee will not be charged.
Additionally, financial institutions will now be required to provide written notice to the customer that explains all of the banks charges associated with overdrafts when opting in for this coverage.
The final rules are issued under Regulation E, which represents the Electronic Fund Transfer Act.
When Do the New Overdraft Regulations Take Effect?
Officially, the Federal Reserve regulations will begin taking effect July 1, 2010, but many banks are moving ahead of that schedule in order to accommodate for the changes.
Lisbeth Cheever-Gessaman - Lisbeth Cheever-Gessaman is a writer, spiritual activist and free spirit who divides her time between Europe and America cultivating a ...
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