September 21, 2009

Key legislators target overdraft fees

Sen. Christopher Dodd, D-Conn., is preparing a bill to prevent U.S. banks from hitting clients with overdraft charges without their permission.

People out there are getting whacked. They should have the right to say 'deny me the transaction,' Dodd told The Washington Post.

Many banks automatically allow transactions on accounts with insufficient funds, then charge overdraft fees, which now average $35 per overdraft.

Critics say banks could deny the transaction and save customers the overdraft fee.

Moebs Services projected banks will collect $38.5 billion in fees in 2009, up from $18 billion a decade ago, when the average fee was $10.

The American Bankers Association said 82 percent of bank customers in a survey had not paid an overdraft fee in the previous 12 months and 96 percent of those who had were pleased the bank covered the transaction.

But Rep. Barney Frank, D-Mass., chairmen of the House Financial Services Committee, said if banks succeeded in preventing the Obama administration from establishing a proposed consumer financial projection agency, they would likely face a bill to curb overdraft fee abuses.

Banks should understand that they can't have it both ways, Frank said.