by Angela Nazworth | April 23, 2012 2:06 pm
During the summer of 2010, federal regulators instituted rules to protect customers from confusing overdraft fees imposed by banks and credit unions. Now, the new Consumer Financial Protection Bureau is closely examining the current practices of nine banks to determine if even more protection is warranted. However, the marketing practices of these banks are under the microscope, rather than the overdraft protection programs themselves.
JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), U.S. Bancorp (NYSE:USB), Regions Financial (NYSE:RF) and PNC Financial Services (NYSE:PNC) are six of the nine banks under scrutiny, according to Bloomberg.
Until August 15, 2010, many financial institutions padded their bottom lines by automatically enrolling customers in what they call overdraft protection service. For instance, if a customer who only had $35 in her checking account used her debit card to purchase $50 worth of products from Wal-Mart (NYSE:WMT), the bank would automatically cover the extra $15 at the register, but then charge the customer up to $35 for that service.
Some customers didn’t mind the automatic service because it saved them from embarrassing situations. However, for many others, the overdraft programs became a source of towering debt and contention.
After the regulations went into effect, banks were still permitted to offer overdraft programs, but only for customers who voluntarily “opted-in.” Since the new rules meant banks stood to lose a lot of easy revenue, they relied heavily on creative marketing solutions to make opting-in an attractive option.
The recent examination looks at the various methods financial institutions use to convince customers that their overdraft protection programs are in their best interest. The CFPB is scrutinizing marketing materials (both online and in mail) as well as talking points used by the banks’ employees to decide if the tools could be construed as coercive or confusing.
Federal regulations investigators will also review the sizes of the overdraft fees, sources told Bloomberg.
Source URL: http://investorplace.com/2012/04/overdraft-fees-get-another-look-from-regulators/
Short URL: http://invstplc.com/1fD4PGZ
Copyright ©2017 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.