New rules on over­draft fees take ef­fect

Only new cus­tomers cur­rently pro­tected by per­mis­sion law

Austin American-Statesman - - BUSINESS & PERSONAL FINANCE - By Jeff Gelles

PHILADEL­PHIA — The end is ap­proach­ing for the sur­prise $37 cup of cof­fee or $40 sandwich — the ones for which $2 or $5 went to the eatery and $35 went to your bank for over­draw­ing your ac­count.

Start­ing to­day, banks may charge new cus­tomers an over­draft fee for debit card pur­chases or ATM with­drawals only if the bank has ob­tained per­mis­sion be­fore­hand to cover the short­fall.

Sim­i­lar rules are set to take ef­fect Aug. 15 for ex­ist­ing bank cus­tomers — a dead­line that has caused a blitz of ac­tiv­ity at banks ea­ger to keep their share of a rev­enue stream that ad­vo­cates say is worth more than $11 bil­lion a year.

At least a few, in­clud­ing Citibank, Wa­choiva Corp. and Bank of Amer­ica Corp., say they will no longer rou­tinely al­low cus­tomers to spend money be­yond their bal­ances in ex­change for fees that else­where can to­tal more than $100 a day if a cus­tomer com­mits mul­ti­ple over­drafts.

“This is re­ally a re­sult of lis­ten­ing to our cus­tomers, the vast ma­jor­ity of whom have said they don’t want to spend money that is not in their ac­count,” said Bank of Amer­ica spokesman T.J. Craw­ford.

But ac­cord­ing to a Con­sumer Fed­er­a­tion of Amer­ica sur­vey, 13 of the nation’s 15 largest banks are invit­ing cus­tom- ers to opt in to their over­draft pro­grams.

“We’re of­fer­ing our cus­tomers a choice rather than mak­ing the de­ci­sion for them,” said Bar­bara Nate, a spokes­woman for Wa­chovia, which is owned by Wells Fargo & Co.

In a cus­tomer brochure, Wa­chovia says the ad­van­tages of its Debit Card Over­draft Ser­vice in­clude the con­ve­nience of be­ing able to com­plete a trans­ac­tion de­spite in­suf­fi­cient funds and the value of hav­ing the ser­vice avail­able as a backup plan for pur­chases.

Wa­chovia’s brochure also notes that the ser­vice gen­er­ates no fees if not used or if the ac­count holder makes a de­posit or cov­ers the over­draft on the same busi­ness day.

Like Wa­chovia, many other banks are of­fer­ing op­tions for avoid­ing the largest over­draft fees, such as link­ing a check­ing ac­count to a sav­ings or credit ac­count. And both say they are re­mind­ing cus­tomers of tools such as low-bal­ance alerts, which can be sent to cell phones or e-mail ad­dresses.

But ad­vo­cacy groups such as the Con­sumer Fed­er­a­tion, which want tighter re­stric­tions on debit card over­drafts, are urg­ing cus­tomers to re­ject the banks’ in­vi­ta­tions for what the ad­vo­cates de­scribe as “over­draft loans.”

If it were com­puted as an an­nual in­ter­est rate, the cost of a $10 over­draft held for two weeks would range above 900 per­cent at all of the 15 banks sur­veyed, and as high as 3,200 per­cent, the group said.

“It’s still a very ex­pen­sive way to get a short-term cash ad­vance,” said Jean Ann Fox of the Con­sumer Fed­er­a­tion.

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