Banks continue to rake in huge amounts in overdraft fees
September 21, 2011
By Rita R. Robison
Overdraft fees continue to bring in billions for banks, even after a peak in revenues from 2009, a study from Moebs Services, a research company, shows.
Banks and credit unions received $30.8 billion in revenues from overdrafts in the first two quarter of 2011. They made $33.1 billion in 2010.
New federal guidelines require banks and other financial institutions to notify consumers about overdraft fees when they use their debit cards. However, some consumers don’t want to have their purchases rejected when they run out of money, so they allow bank fees to be charged. Often they don’t realize how high the bank fees are nor do they understand what method their bank uses to make the charges.
Federal regulators are monitoring the new regulations to make sure that banks are complying with consumer overdraft protection requirements.
The new Consumer Financial Protection Bureau also plans to take a closer look at overdraft guidelines and transparency.
Meanwhile, class action lawsuits in federal court charges that 30-plus banks – including JPMorgan Chase, U.S. Bank, and Wells Fargo – have charged excessive overdraft fees by re-sequencing transactions from high to low. That means consumers’ bank accounts will be depleted faster, and they’ll pay more bank fees because there are more, smaller checks.
Moebs has estimated that 90 percent of overdraft fees are paid by the 10 percent of customers with the least funds.
The documents in one lawsuit describe banks’ predatory overdraft practices and how banks have created schemes to extract more fees from customers who are living paycheck to paycheck.
Bank of America settled for $410 million in May and Union Bank customers were certified as a class in July. More class action lawsuits are likely to follow.
Several banks were also recently denied a request to arbitrate the cases – indicating that these claims on behalf of millions of Americans will continue to move through the courts.
The case, In re: Checking Account Litigation, MDL 2036, is before U.S. District Judge James Lawrence King in the Southern District of Florida.
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