If your debit card use has ever resulted in an unexpected overdraft fee, you now have the chance to give the government a piece of your mind: Through Monday, consumers can go online at the Federal Reserve’s Web site to share their thoughts about proposed changes to rules governing overdraft "services" provided by banks, credit unions and other financial institutions.
In recent years, many banks have begun to automatically enroll consumers in overdraft programs. If you try to withdraw or charge more money on the debit card than you have in your checking or savings account, the bank doesn’t deny the transaction but rather allows it to go through with an added overdraft fee.
Those fees can be costly. According to testimony from Sandra F. Braunstein, the director of the Fed’s Division of Consumer and Community Affairs, overdraft fees run especially high for in-store purchases made with a debit card. In such cases, "the overdraft fee may substantially exceed the dollar amount of the overdraft," she says. Even a small overdraft could result in a charge of $30 to $40.
The Fed is now proposing changes to Regulation E (the electronic funds transfer rule covering debit cards) that would let consumers decide for themselves whether to participate in a bank’s overdraft service -- and possibly incur the associated fees. Cardholders who decline overdraft protection but have insufficient funds to cover the transaction would simply get denied when attempting to make ATM withdrawals or one-time purchases on a debit card.
Wonder what your fellow consumers are saying about overdraft fees? Here’s a sampling from the 1,600-plus comments submitted so far:
- "Time was when a bank would simply refuse to process any transaction for which you didn't have adequate funds in your account. Now they've figured out that they can make more money if they process the transaction, then hit you with a steep overdraft fee." -- Darryl Lewis, Zebulon, N.C.
- "Our college-student son depends on federal loans for college. He will graduate in May. He is learning to deal with the money, but Bank of America doesn't help much. He was about $2.50 overdrawn at Christmas time; wham -- $35 charge." -- Cynthia Buehling, Little Rock, Ark.
- "Last Thanksgiving, I bought $5 worth of cranberries. An automatic monthly debit had reduced my balance to $3. When my statement arrived, I had been charged $40 for my bag of cranberries." -- Mireille Hug, Elmhurst, N.Y.
- "I feel that a person should have the right to opt for overdraft protection. In today's electronic world, it is possible for the bank to know if there is insufficient funds in the account, and if the individual does not have overdraft then they should just deny the charge. How hard is that?" -- Vicki Lim, Pueblo, Colo.
Now it’s your turn. Visit the Fed online and share your stories and thoughts about overdraft fees for debit card purchases. In today's electronic world, it's not hard to make your voice heard.