Report: Overdraft protection costs bank customers hundreds in fees
Tuesday, June 11, 2013 3:28 PM
Consumers who opt for bank overdraft coverage are more likely to pay hundreds of dollars more in annual fees and to have their checking accounts closed than those who decline it, according to a new U.S. Consumer Financial Protection Bureau report released Monday.
Bureau Director Richard Cordray said his agency is concerned that banks' overdraft practices may "increase costs beyond reasonable expectations," Bloomberg reported. "What is marketed as overdraft protection can, in some instances, create greater risk of consumer harm," he said.
The bureau analyzed data from nine large banks, including Bank of America Corp., Wells Fargo & Co. and Regions Financial Corp. Regulators are also looking at the manner in which banks market overdraft protection plans and the justification for the fees they charge.
Consumers paid $32 billion in overdraft fees in 2012, up slightly from $31.6 billion for 2011, according to Moebs Services, a Lake Bluff, Ill.-based research firm. The fees account for 61 percent of all checking account fees among the large banks that were studied. This percentage is "likely even higher" for smaller community banks, according to the study.
Cordray said nothing in the research suggests banks should be "precluded from offering overdraft coverage," and he promised to continue studying the issue.
To access the full report, click here.