Are you hurting yourself by overdrafting your bank account?

Story highlights Bank overdrafts are a serious problem that is largely seen as a victimless crime. That’s why the C.F.P.B. wants to review banks that derive more than 90% of their revenues from overdraft…

Are you hurting yourself by overdrafting your bank account?

Story highlights Bank overdrafts are a serious problem that is largely seen as a victimless crime.

That’s why the C.F.P.B. wants to review banks that derive more than 90% of their revenues from overdraft fees.

By law, checking accounts are supposed to only have one overdraft fee. But overdraft fees have actually made up one in four banks’ revenues, which could negatively impact consumers who are searching for new banks.

The Consumer Financial Protection Bureau (C.F.P.B.) said on Monday that it plans to review the practices of the country’s largest banks to determine if overdraft fees are being properly communicated to consumers and to what extent consumers are making informed decisions about their checking accounts.

“We found that, in many places, there was no clear balance checking option,” the C.F.P.B. wrote in a blog post. “Many customers are not paying attention to their balances because it is too difficult to view them online.”

That goes for older American banks, too. Of the top 25 banks in the country, 14 had one or more checking account offerings that could not accept an overdraft request without charging customers an additional fee, according to the C.F.P.B.

In fact, more than a quarter of financial institutions found it necessary to place a monthly fee on checking accounts with $10,000 or more in assets, as Money reported in September.

Some smaller banks do require consumers to exceed their monthly minimum balance before charging a monthly fee. “Closing these accounts, or imposing new fees on the customers who maintain them, can reduce the average number of overdrafts by nearly 25 percent,” according to the C.F.P.B.

The C.F.P.B. said that it will review 18 banks for their overdraft practices, “and look at the factors by which consumers might be leaving money on the table.” If banks “systematically fail to adequately communicate with their customers,” the C.F.P.B. said it plans to adopt new rules under the law to “ensure that consumers are getting clear and understandable consent when banks charge them overdraft fees.”

C.F.P.B. director Richard Cordray was hired by President Obama in 2012 to help curb banks’ overdraft practices. He was succeeded by his deputy, Mick Mulvaney, in January.

In a Sept. 26 meeting with banking industry executives, Mulvaney said that the C.F.P.B. should only be involved in “problematic things.”

This story originally appeared on Don’t Waste Your Money. Checkout Don’t Waste Your Money for other great tips and ideas to make the most out of life.

Leave a Comment