Commentary: Consumers deserve more protection from bank fees

This editorial appeared in The Charlotte Observer.

Banks call it overdraft "protection" but consumers might call it something else after reading a new FDIC report.

A Federal Deposit Insurance Corp. survey shows banks are automatically enrolling customers in their expensive, fee-based overdraft plans. They rake in billions of dollars annually, often from customers who don't know they're overdrawn until they're notified of the fee after the transaction. Additionally, the FDIC found banks charged fees or interest if the borrower's account maintained a negative balance after an overdraft.

Customers are responsible for overdrafts, and not knowing the status of their accounts. But when banks inform customers of a fee only after an ATM or debit transaction, they are denying them an opportunity to cancel the transaction and avoid a fee.

That's what some critics fear is the intent. Several U.S. lawmakers have complained about the policies and are urging that banks be required to offer a chance for cancellation, and require an explicit "opt-in" from customers before they're signed up for overdraft protection. Those are good changes that benefit consumers.

The Center for Responsible Lending calls these policies abusive and is urging Congress to "curb these and other manipulations that result in unfair fees." The center pointed out that many of those affected by such charges are the ones who can least afford them. The survey showed low-income customers were more likely than those with higher incomes to incur overdraft fees – 38 percent to 22 percent. Nearly half of young adults were likely to incur such fees.

To read the complete editorial, visit The Charlotte Observer.