Overdraft Protection: Coverage and Fee DisclosureBanker Resource
July 13, 2012 — 1,500 views
There was once a time when banks would impose strict overdraft coverage and fees on those customers who spent more than they had in their accounts. These lenders were not required to disclose their actions in such situations, and the amount of money they deducted from offending accounts was not made public.
However, the Overdraft Protection Act of 2009 was drafted to protect customers and eliminate such abusive overdraft practices. In October 2009, the Committee on Financial Services held a hearing on the bill to craft restrictions that would potentially prevent banks from continuing their unfavorable practices.
In addition, the Federal Reserve Board also issued a proposed rule to amend the Electronic Funds Transfer Act, which would limit the ability of banks to fine people who overdraft from ATMs or through debit card transactions, without providing an opportunity to opt out of the action.
Today, banks are required to provide their customers with ample opportunities to avoid being penalized for having insufficient funds through the use of overdraft protection. In some cases, banks will email customers who are approaching the threshold, so they have an opportunity to prevent fees in the future.