Daily Archives: 08/12/2010

FDIC Urges Stronger Debit Card Oversight

The FDIC has proposed guidelines its claiming could save financially
vulnerable American families millions of dollars a year in overdraft
fees. Encouraging banks to offer customers lower-cost overdraft
alternatives rather than charge unlimited high-cost overdraft fees, the
proposal would require banks to contact customers incurring six
overdraft fees within 12 months and offer—and explain—less costly
options. The banks also would be discouraged from re-ordering
transactions to maximize overdraft fees. Banks and credit unions
frequently promote their most expensive form of overdraft coverage,
which typically imposes a $34 fee per overdraft—twice the amount of the
typical debit card purchase that triggers an overdraft—rather than
reasonably priced options like a low-interest line of credit or an
affordable small-dollar loan. Financial institutions earn $24 billion
annually from these high-cost programs. Citibank has never charged
overdraft fees on debit cards, Bank of America is stopping the practice
but Wells Fargo continues to charge over a billion dollars a year in
debit card overdraft fees.