In a move that’s sure to delight debit cardholders nationwide, the Federal Reserve today imposed a new rule prohibiting banks from automatically enrolling customers in “overdraft protection” plans, CNN Money reports. These shady programs — which banks have claimed are meant to help customers — allow debit cardholders to spend money they don’t have, then slap them with fees up to $39 each for every transaction that occurs with a negative account balance. Since banks don’t notify customers immediately when their accounts are overdrawn and decline further transactions, people blithely continue using the cards; stories have abounded of people who were hit with $600 and more in overdraft fees before they realized what was going on.
Currently, more than 75% of banks automatically sign customers up for overdraft programs, according to a study by the Federal Deposit Insurance Corp. [SOURCE: CNN Money]
Until now, bank customers were enrolled in overdraft protection programs without their knowledge and with no way to opt out. Thanks to the Federal Reserve’s new rule, banks will be required to inform customers about the plans and allow them to opt in based on their own discretion. This rule will take effect July 1, 2010.
So when your bank offers you overdraft protection next year, be aware that you have the option to decline this “service” and save yourself a few hundred dollars and a lot of aggravation.
Cheers to the Fed for making a change that will have an immediately tangible, positive effect on American citizens’ wallets.