Wednesday, June 10, 2009

Senator Dodd urges Fed to act soon on overdraft fees

Senator Dodd urges Fed to act soon on overdraft fees
WASHINGTON (Reuters) - Senate Banking Committee Chairman Christopher Dodd said on Tuesday that he is pressing the Federal Reserve to act quickly to prohibit banks from automatically charging overdraft fees on debit card and ATM transactions.
The Connecticut Democrat said in a letter to Fed Chairman Ben Bernanke that consumers should be given the opportunity to "opt-in" to these fee-based overdraft programs instead of automatically applying them.
"I am concerned that some financial institutions may be increasing overdraft fees or creating new ones, which often take consumers by surprise and may bear little relation to the actual amount of overdraft," Dodd said in a statement.
The central bank is mulling new rules on whether customers should be allowed to choose whether they want to participate in the overdraft program which can involve fees and charges if a customer withdraws more money than is in the bank account when using a debit card or an automatic teller machine.
The Fed is expected to issue a set of final rules by the end of the year, as Dodd and other congressional Democrats pile on the pressure to help consumers struggling in the current economy, as they did with the credit card reform legislation.
The Fed is considering whether to allow the consumer to opt-in or opt-out, which would automatically place the customer in the overdraft protection unless the bank is notified.
Currently many banks automatically include customers in overdraft plans on their debit and ATM transactions.
"I ask that you adopt the opt-in approach to overdraft fees in the final rule," Dodd said in his letter to Bernanke.
Banks, which are facing new credit card rules, also have been criticized for manipulating the sequence of transactions to maximize fees.
In the House of Representatives, Carolyn Maloney, a New York Democrat, has introduced legislation to rein in overdraft fees.
The public comment period on the Fed's proposals closed on March 30. The Fed is expected to evaluate the comments and conduct additional consumer testing, as it did with credit card practices, before issuing final rules.
(Reporting by John Poirier; editing by Carol Bishopric)

Source: Reuters

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