BanksAct

Banks defend their bounce fees by saying the charges are actually a “courtesy” for their customers.

In recent years, most banks started approving, rather than declining, debit and check transactions that exceeded what customers had in their accounts. Consumers would rather pay $39-a-pop bounce fees, banks contend, than risk embarrassment at the checkout counter.

Turns out: not so much. A survey for the Center for Responsible Lending indicates a vast majority would prefer a choice in whether transactions were approved by their banks. Furthermore, most want their banks to decline the kinds of small transactions that typically trigger the fees.

The survey by Opinion Research found:
82% of the 2,023 adults polled wanted to choose whether bounce protection was added to their account. Bounce protection is typically instituted automatically if you don’t have true overdraft protection, which links your checking account to a savings account, credit card or line of credit.
72% to 74% would prefer their banks decline rather than process transactions of $5 to $40 that caused an overdraft fee. According to the center’s research, the typical debit card transaction that results in a bounce fee is for a $20 purchase. Overall, Americans paid $17.5 billion in bounce fees during 2006 to cover $15.8 billion in overdrafts.

This isn’t just an issue for the young, broke and careless, by the way. About a quarter of those overdraft fees were paid by Americans over 55, the center estimates. Low-income seniors who rely on Social Security paid about $1 billion of the total.

But surely, now that banks know we want a choice, they’re rushing to offer one, right?

(Pause for hysterical laughter.)
Consumer advocates have been warning about the dangers of banks’ bounce-fee programs since they started gaining ground six years ago. (Banks took a cue from the credit card industry, which learned a while back that big money could be made by approving over-limit transactions and slapping customers with extra fees.)

I’ve been railing about “courtesy overdraft” for years, starting with “Don’t be duped by bounced-check ‘protection.’” Yet the programs have spread from a handful of smaller banks to most major institutions.

The reality is that banks are loath to give up such a profitable venture, and many still don’t give customers the choice of shutting off bounce protection. Banks even resist the idea of giving consumers a warning when an ATM or debit card point-of-sale transaction would result in an overdraft — something that’s technically not that tough to do.

Should bank customers keep better track of their balances so they don’t spend more than they have? Of course. But everyone makes mistakes, and the penalty for doing so shouldn’t be two or three or four times the amount of the overdraft.
And banks definitely shouldn’t make an overdraft more likely by adding the amount of bounce protection to the balance you see at the ATM.

You can fight back in the following ways:

Sign up for real overdraft protection. Having your checking account linked to another account — savings, credit card or line of credit — is a much cheaper than submitting to bounce protection. True overdraft protection typically costs $10 to $50 a year, plus a small fee or interest charges if you incur an overdraft.

See whether you can turn off “courtesy overdraft.” If your credit is bad and your bank doesn’t offer overdraft protection linked to a savings account, you may not be able to qualify for true protection. If that’s the case, see whether your bank will let you opt out of bounce protection or switch to an account that doesn’t include it.

Wells Fargo, for example, offers “Opportunity Checking,” an account “that is specially designed for customers who have been unable to open a checking account due to their prior credit or banking history,” said Julia Tunis, a Wells Fargo spokeswoman. “Opportunity Checking limits a customer’s likelihood of incurring overdrafts by declining debit card and ATM transactions in excess of available balance.”
You can also switch banks.

Set up alerts. Many banks’ Web sites allow you to set up e-mail or text alerts that will notify you if your balance falls below a certain dollar amount. That can give you enough time to transfer money from your savings account or hold off on future transactions to avoid overdrafts.

Complain to lawmakers and regulators. The Consumer Overdraft Fair Practices Act was introduced in Congress in 2007, but never became law. To urge that the legislation be reconsidered by the new Congress, contact your representative in Washington. You can find the member of the House for your district here. To contact your senators, use the by-state search at the top of the Senate home page, then follow the contact link to the respective e-mail form page.

Liz Pulliam Weston

http://articles.moneycentral.msn.com