Bank fees prompt call for better forms
Too many overdrafts lead to plain-English disclosure paperwork
The federal government is turning to plain-English forms to combat confusion surrounding checking-account overdraft fees.
Concerned about steep bank overdraft fees paid by Americans, the Consumer Financial Protection Bureau unveiled new easy-to-understand overdraft disclosure forms that it hopes more banks will use — or at least use as an inspiration for their own forms — when signing up new customers.
Some overdraft fees are avoidable. And the new forms explain clearly what types of transactions are subject to the fees, how much customers pay if they overdraw on their accounts and how they can opt out of certain situations.
Banks aren’t required to use the one-page form, which has four “prototypes.” At least not yet. If the industry fails to adapt to the form or improve customer communication in similar ways, the agency said it may enact a rule requiring clearer disclosure.
One of most common sources of consumer complaints, overdraft fees are charged by banks when checking-account holders spend more money than they have. Marketed by banks as a “customer service,” banks charge fees, typically about $35 per transaction, for clearing transactions whose amount exceeds the money left in the account.
Americans spend about $15 billion a year paying overdraft fees, the consumer agency estimates. While these fees pad banks’ bottom line, they often hit financially struggling customers the hardest. The typical frequent overdrafter has an average account balance of less than $350, the agency said.
Because so many customers now rely on their debit cards for routine purchases, balancing their checkbooks has become more complicated, contributing to higher instances of overdraft fees, Richard Cordray, the agency’s director, told reporters Thursday.
Banks can charge overdraft fees on debit-card charges, ATM withdrawals, checks and online payments. But a law enacted in 2010 requires banks to specifically get “opt-in” signatures from customers if they want to charge fees for clearing overdrawn debit card charges and ATM withdrawals.