Guest Blogger Arone Silverman
With Credit Card reform on the move, Congresswoman Carolyn Maloney (D-NY) along with the help of Representatives Barney Frank (D-MA) and Luis Gutierrez (D-IL), called on the Federal Reserve to strengthen regulations on bank overdraft fees. They are requiring banks to gain consumers approval before applying overdraft fees, and prohibit transaction postings in a sequence that maximizes overdraft fees. Maloney is trying to capitalize on the successful passing of a comprehensive credit card bill through Congress as consumers have been complaining of hidden fees and predatory lending practices.
“When overdraft fees are $30 or more, a $5 treat at Starbucks becomes a $35 shock after the overdraft fee is applied. And when multiple purchases in a day are posted in a sequence that only benefits the bank—incurring multiple fees—then something is broken in the system and must be fixed,” Maloney said.
Last November the FDIC released a study on overdraft fees finding that over 75% of banks automatically enroll customers in overdraft programs and do not allow any opt out. Maloney and others in Congress are trying to curb these practices and the Federal Reserve should settle on regulations by the end of the year.