How to confront your bank about overdraft fees

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If you’ve got a problem with your bank’s overdraft fees, you should say something.

That’s what U.S. Sen. Cory Booker recently did. In letters to 13 bank CEOs, the New Jersey Democrat asked for details about their overdraft practices, efforts to convince customers to join overdraft protection programs and reliance on overdraft fees as a source of income.

One of his key concerns: Only a small percentage of consumers shoulder the burden of paying hefty overdraft charges.

“Millions of Americans are getting pummeled by these fees, which can create a treadmill where consumers cannot keep up,” Booker wrote. “Research from the CFPB and the Federal Deposit Insurance Corporation suggest that just 8 percent of accountholders account for 75 percent of all overdraft fees charged.”

Those charges can sting, too.

Bounce a check or use your debit card without enough funds to pay for your transactions and your bank may slap you with an overdraft fee. The national average for what’s also called a nonsufficient funds, or NSF, fee is more than $33, according to Bankrate’s latest research.

Getting your facts straight

Looking into your bank’s overdraft protection policy is something you should do before opening a new checking account. That’s an important step to take, in addition to assessing other fees and balance requirements. And don’t forget to compare rates on CDs, savings accounts and other products.

Writing a letter — or an email — isn’t a bad idea, especially if you’re confused about your bank’s overdraft protection program.

“Banks are required to disclose the terms of their overdraft services before opening a new account, but it never hurts to ask a question (in person, on the phone or via email), in case their disclosures are confusing or unclear,” says Peter Smith, a senior researcher at the Center for Responsible Lending.

Your bank doesn’t need permission to charge you for overdrawing your account when you pay with a check or electronic funds transfer.

Under federal law, however, your bank can’t charge you an overdraft fee when you overdraw your account at the ATM, unless you opt in to pay the fees. That rule typically applies to overdrafts that occur when you swipe your debit card at the store checkout, too.

Opting in to overdraft fees

Opting in means you’re giving the bank permission to approve a transaction even though you don’t have enough money in your account. If that occurs, you’ll be charged an overdraft fee. If you don’t opt in, your transaction will be denied if you don’t have enough money in your account. But you won’t pay a fee.

The problem is, more than half of people who paid an overdraft fee don’t remember opting in to coverage, according to a 2014 report from the Pew Charitable Trusts.

If you’ve been charged an overdraft fee unfairly, speak up. If necessary, contact the Consumer Financial Protection Bureau.

“If a consumer’s charged an overdraft fee that they do not agree with, then they can certainly call their bank,” says David Pommerehn, associate general counsel and vice president of the Consumer Bankers Association.

“Banks have a discretion to reverse fees if they find that it was paid or applied inappropriately,” Pommerehn says. “And if you can’t get further relief from your bank and there’s a disagreement, you certainly have the ability to file a complaint.”

The cost of opting in

The CFPB says that those who opt in to overdraft fees tend to pay seven times more in overdraft and NSF fees than those who don’t. According to its new study, frequent overdrafters who opt in often pay $450 more in fees than those who don’t.

The agency recently introduced models for overdraft disclosure forms that would make it easier to decide whether to opt in and pay fees. Since the forms are still being tested, consumers must educate themselves about their banks’ policies and find ways to avoid costly overdraft charges.

If you’re spending a lot of money on fees, know that you can always opt out of overdraft coverage, Pommerehn says. Signing up for email or text alerts could help you avoid overdrawing your account.

And if you’re struggling to pay the fess you’ve been charged, your bank may be willing to help.

“Call your bank and see what kind of relief you can get, how you can work out a situation where you can get out from under the red essentially and get back in the black,” Pommerehn says.