FDIC study: outrageous overdraft fees

Average fee of $29
A 2007 Bankrate study of overdraft fees found that the average fee charged by the five largest banks and the five largest thrifts in each of the top 10 metropolitan markets was $29.

Fox says that the typical overdraft fee is the same as the bank's non-sufficient funds (NSF) fee.

"The reason that banks charge the same fee essentially for an overdraft as they do for an NSF transaction is because under the antiquated Federal Reserve rules that are still in effect the banks don't have to comply with the Truth in Lending regulations if there's no contract covering your overdraft and if they charge the same fee they would have charged to bounce it."

FDIC spokesman Andrew Gray says the purpose of the study wasn't to make any specific policy recommendations.

"The purpose was to inform the policymakers and people in the industry what's going on in the industry -- what the trends are and the findings. There's a high level of industry interest on the regulatory side with the Fed moving forward on potential rules that govern UDAP (Unfair and Deceptive Acts and Practices). And there's interest on the (Capitol) Hill too. So, we believe it will be an important tool and resource for policymakers to look at."

Fox says she expects Rep. Carolyn Maloney's (D-NY) bill, the Consumer Overdraft Protection Fair Practices Act to be reintroduced in Congress in 2009. The bill amends the Truth in Lending Act, the Electronic Funds Transfer Act, and the Expedited Funds Availability Act to beef up consumer protections when it comes to automatic overdrafts.


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