This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Overdraft Misery Continues, Despite Fed Rules

Stocks in this article: C BAC WFC FITB STI JPM

By Laura Rowley, DailyFinance

NEW YORK ( DailyFinance) -- A year after the Federal Reserve enacted new rules to rein in abusive bank overdraft practices, fees remain high and some institutions actually have slapped on additional penalties, according to a new survey of the nation's 14 largest banks by the Consumer Federation of America.

Last year, the Fed prohibited banks from enrolling consumers in overdraft protection programs unless they choose to "opt-in." Previously, most banks automatically covered payments that exceeded the account balance, charging a fee for each offense, along with additional fees if customers didn't quickly repay the loan. While the rules have helped, major issues remain, consumer advocates say.

More from DailyFinance
The True Cost of State Sales Tax Holidays
New Green Scheme: $18,000 Flip-Flops
Chinese Families Save Way More Than Americans

"The Fed's rule cut the number of people who participated in these programs, but for the people who do opt in, there's no limit on the size of fees or the number of overdraft fees (banks) can charge," says Ed Mierzwinski, consumer program director with U.S. PIRG, the federation of state public interest research groups.

The median overdraft fee is $35, unchanged from last year, and customers can incur anywhere from three -- at JPMorgan Chase (JPM) -- to 10 -- at Fifth Third Bank (FITB) -- of these fees in a single day, according to the study. In the last year, BB&T (BBT) doubled the number of overdraft fees it charges per day to eight, while Regions Financial (RF) raised its daily limit from four to six per day, the survey found. Only TD Bank (TD) reduced the number of fees per day from six to five.

How Some Banks Milk Overdrafts

In addition, the Fed rules don't prevent "reordering," in which banks pay the largest checks and debits first in order to trigger additional fees. The practice remains widespread, the survey found. Here's how it works: A consumer thinks she has $1,200 in her checking, but only has $1,100. She conducts five debit transactions totaling $180 and then pays her rent with a check for $1,000. She has overdrawn the account by $80. Two weeks later, when the consumer deposits her paycheck, the bank gets its money back.

When all six transactions arrive at the bank, the bank processes the rent payment first, followed by the biggest debit transaction of $100. Four smaller debits bounce, resulting in four separate fees for $35 each, or $140. Had the rent been paid last, the customer would only have been on the hook for $35.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs