When I saw the recent headline — “Limits on overdraft fees won’t cripple banks, research says” — my first thought was, “Oh good. How nice to hear it won’t kill the banks to stop robbing us.” My second thought was: “I bet they’ve already found another way to steal our money.”
Excuse me if I sound bitter, but I am still licking my wounds from my bank’s recent assault on my checking account — in the form of $540 in overdraft fees.
The Federal Reserve passed a law in November requiring banks to get customer consent before imposing steep overdraft fees. The new rule takes effect in July 2010, perhaps to give the banks time to loot a few thousand more customers who aren’t yet aware of it.
I didn’t learn this until our bank cleared a large check that we hadn’t moved enough money to cover. It overdrew our checking account and set off an avalanche of fees as 17 other debit card transactions went through with no red flag. I’m talking about things like my husband’s $7.65 lunch or the $18.96 I spent on a few groceries. We had enough in our savings account to cover the overdrafts, but instead of notifying us or putting a hold on our cards, our bank automatically paid each one, and for each one automatically imposed a $30 fee.
When my husband checked our balance online and saw all that red, he nearly fell over. A few hours earlier I had gone to the ATM, deposited a $100 check and received a receipt with no indication of a negative balance. How could this happen?
The next day, we got the first of three overdraft notices in the mail. I called and made an appointment with a branch assistant who said, “I’m not sure there’s anything we can do.” The bank had already helped itself to the fees, so it was a matter of trying to get our money back.
I wrote on my Facebook page, “Bank capitalized on an overdraft error to take $540 in courtesy fees. Going down there to ask for it back.” The general response was, “Good luck with that.” A friend told me the same thing happened to her and she lost $300 in fees. My dentist told me his bank of 32 years imposed $1,300 worth of fees for a series of overdrafts and was perfectly willing to lose him as a customer – and did – rather than cut him a break.
My sister posted a story on my Facebook page about the Fed’s new rule. “The law against this doesn’t take effect until July,” I commented. “Does that mean it’s not a crime now?”
I cried all the way to the bank. I was scared they might really be able to keep all that money and mad they could get away with it. The branch assistant had no pity – in fact, she berated me for getting upset. She explained we were signed up for a service called “Overdraft Freedom” which allows one to make almost unlimited overdrafts that the bank will cover for a “courtesy fee” of $30 each.
“Why would anyone agree to that?” I asked. She replied that it saves one the embarrassment of bouncing a check or having one’s card not work. She allowed me to write a note to the powers that be asking the bank to forgive the fees because we had never been informed of or specifically agreed to Overdraft Freedom and we wanted out.
I think what got us off the hook was my knowledge that the Fed had just decided to ban this practice. As it was, the bank let me stew all day before calling to tell me I would have to pay only one $30 fee, for the first overdraft.
I have not yet left that bank, as I have yet to find another more deserving of my business. Meanwhile, I was interested to read about new research by bank consulting firm Bretton Woods on “the impact of pending Federal Reserve restrictions on the financial industry.”
The story reported that banks earned more than $38 billion in 2009 from overdraft fees – so much that some people actually worried they might go under if they couldn’t keep doing it.
Well, it turns out that’s nothing to worry about – Bretton Woods estimates the new rule will cost banks and credit unions “roughly $7.3 billion in fee income, significantly less than other consultants’ projections.” The new rule will limit some overdraft fees, but not all, and banks “can continue to clear large transactions first, emptying the account quicker, and charge overdraft fees as high as they want,” the article said.
I’m betting they’ll also be slipping in more “services” with names like “Overdraft Freedom” that sound downright beneficent when you’re opening an account and signing on 12 different dotted lines.
In fact, I’m sure they’re banking on it.