'Bounced-check protection' rules draw critics
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"This is an extension of credit," says Fox. "If you pay $20 to get $100, that's no different than going to a payday lender and paying $120 to walk out with $100, and then you pay it back with your next paycheck."

Nessa Feddis, senior federal counsel at American Bankers Association, says the new rules clear up previous questions regarding fee disclosure.

"Earlier on, when the programs were new, there was some confusion, but a lot of the disclosures have improved significantly, and the Fed and the agencies have addressed the relevant issues.

"Consumer groups think that no one should ever pay an overdraft. But if you prohibit that, there will be riots in the streets. If you don't pay a customer's mortgage, they'll be furious. That's not consumer friendly; it's not what consumers want. Consumers want the bank to pay (overdrafts). We don't think people should write checks when they don't have the funds, but people make mistakes and you need some compassion here," says Feddis.

The new rules require institutions that promote the payment of overdrafts in an advertisement to disclose the total amount of fees or charges in the customer's periodic statement. Consumer groups argue that that's after the fact. Banks must also inform customers of fees for the service when they open an account.

The Fed also expressed concerns about misleading advertisements and outlines several examples of prohibited ads.

Examples of prohibited ads:

• Representing an overdraft service as a line of credit • Representing that the institution will honor all checks, when the institution retains discretion to not honor them. • Representing that consumers with an overdrawn account are allowed to maintain a negative balance when terms of the service require promptly paying the overdraft • Describing an overdraft service solely as protection against bounced checks when the bank permits overdrafts for a fee in connection with ATM withdrawals and other electronic fund transfers that permit consumers to overdraw their account   Source: Federal Reserve's Final Rule - Regulation DD

The Fed has left the door open to eventually putting bounced-check protection plans under Truth in Lending regulations if necessary. Consumer groups vow to continue monitoring the market and say they will pursue congressional legislation.