In late September, Bank of America announced in a press release that it has modified its policy for charging what it calls overdraft fees,
but what some critics classify as abusive overdraft loans.
In some cases, "overdraft fees" and other credit card fees and practices cause some people to file bankruptcy.
What are Abusive Overdraft Loans?
In the era of debit card usage, it’s far too easy to spend more money than we have. And most banks allow customers to make transactions even if they don’t have sufficient funds in their accounts – but each such transaction results in a fee.
The so-called fee is, essentially, a super-short term loan: the bank covers your purchase and you repay the amount plus $25 – $35. This may not sound like much, but if you make several over-limit purchases in a day, it can add up.
Bank of America’s New Policy
Earlier this year, BoA introduced fee increases, but apparently changed their plans in light of the negative publicity credit cards have received recently (Credit Cardholders’ Bill of Rights, anyone?).
Here’s a summary of what the new BoA policies will look like beginning October 19th:
- For overdrafts totaling less than $10 in a single day, Bank of America will not charge any overdraft fee, as long as the account is settled within five days. (A $35 fee will be levied if the account remains unbalanced after that period.)
- The bank will set a limit of four overdraft charges in a single day. (This is a change from the policies introduced earlier, which raised the cap to ten.)
- BoA will also modify the opt-out process so consumers can choose not to have “overdraft protection” on their accounts. For the time being, you may have to go to a physical bank location to do this, though the bank is reportedly setting up a phone service.
- BoA will outline fees and charges in what it calls “Clarity Commitment” – apparently this will provide a plain-language explanation of their overdraft system.
Protecting Yourself from Abusive Overdraft Loans
If you aren’t sure whether or not your bank offers overdraft protection,
be sure to find out. In most cases, opting out of such programs is a good idea. By eliminating the service, you will likely be denied when you try to make a purchase or withdrawal from your account when you have insufficient funds.
For most consumers, the temporary embarrassment is a better bargain than the permanent fees.
Additional Resources
Summary: Credit CARD Act of 2009 (PDF)
Study: Overdraft Protection Programs: The Emerging Battleground for Bankers and Consumer Advocates (PDF)
Tags: bank fees, bank of america, BoA, overdraft fees
This entry was posted on Friday, October 2nd, 2009 at 1:25 pm and is filed under Credit and Bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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Hey Folks, I just saw a great short video called “How to Beat the Bank” about someone who recovered their bank fees by filing a claim in small claims court against Wells Fargo. Very inexpensive to do. Here is the link: http://current.com/items/88849140_how-to-beat-the-bank.htm
In this movie, Ralph Nader suggested that every person unhappy with their overdraft fees should file a claim in small claims court against the bank. It probably costs the bank more to hire an attorney than to just return the fees to you. If the millions of people who have been charged these criminal fees were to file in small claims court, the banks would stop this practice quickly. Good luck!
I have closed out my account with RBC bank and I also closed out an account at Bank of America because of their predatory overdraft fee practices. Today I reached the limit of my tolerance of this overdraft fee theft when I was charged $164 in overdraft fees while my account only went minus by $11.84. They also processed the largest transaction first to insure that they whipped their slave the maximum possible amount. We are not slaves, we have the freedom to change to a bank that allows you set up your debit card to decline transactions that exceed the available balance (even if a card decline is slightly embarrassing ), thereby eliminating overdraft fees. I just learned that two US banks that allow this option are Wachovia, and Woodforest National Bank. If everyone closed out their accounts at banks that charge excessive and oppressive fees (such as Bank of America and RBC), and moved to more friendly banks that at least allow you an option, then this abusive banking practice would stop quickly. We can’t wait for the politicians (who don’t care about the plight of the low income, or the unemployed) to pass laws to protect us from this bank rape, we have to take action ourselves.