Big banks can't charge overdraft fees?

July 1, 2013 12:51 PM

In an article posted to the front page there is this statement: Under the Dodd-Frank financial overhaul law, banks with more than $10 billion in assets are barred from levying overdraft fees on customers’ checking accounts.

Is this true? I recently had two small overdrafts hit my account and in addition to automatically pulling funds out a savings to cover them (which was already setup years ago) I was charged $12.50. If I call my Big Bank right now and tell them their assets are more than $1.4 trillion so I need my $25 back are they going to laugh at me?

posted by Big_B to Work & Money (7 answers total)

Here's Felix Salmon:

This, it seems to me, is a clear failure of behavioral economics — or, to put it another way, shows the degree to which a determined corporation can circumvent rules designed to prevent fee-gouging. Under the new regulations, banks could no longer automatically sign account-holders up for these huge overdraft fees; instead, those account holders had to opt in. But a study last year from the Pew Charitable trusts — which came out a couple of months after my op-ed — found that “more than half of those hit with overdraft fees did not believe they had opted in to the policies”.

posted by General Malaise at 1:04 PM on July 1, 2013 [1 favorite]

I have specifically opted out and still be "overdrafted" and hit with fees. The way it works if that if i try and just go to the grocery store and buy a head of lettuce when there's only 20 cents in my checking account my card will be declined.

However, If i had gone out and gone to two bars who don't put their charges through until midnight, sometimes that can do it. "Autopay" type stuff like paypal can also suck the account to a negative balance.

It's a bit weasel dick, but i also kinda understand a bit since i can't think of any other solution that wouldn't leave restaurants and such that enter tips at the end of the night in the lurch.
posted by emptythought at 1:08 PM on July 1, 2013 [1 favorite]

Best answer: Big_B: Is this true? I recently had two small overdrafts hit my account and in addition to automatically pulling funds out a savings to cover them (which was already setup years ago) I was charged $12.50.

This is not an overdraft fee. This is an "overdraft protection fee" and that $12.50 used to keep you from being hit with a $39.50 (or whatever) overdraft fee. If you'd rather just get declined at the point of sale or hit with an overdraft fee in cases like emptythought outlines, you should cancel that overdraft protection.
posted by Rock Steady at 1:26 PM on July 1, 2013 [1 favorite]

Oh, and for what it's worth, I've had very good luck getting my megabank to reverse the occasional overdraft protection fees I've been hit with.
posted by Rock Steady at 1:32 PM on July 1, 2013

There were more stringent rules put into place to handle overdrafts that are a result of debit card purchases. You have to specifically Opt-in if you want the charges to go through even if you don't have sufficient funds. My bank rolled that change out in the Summer of 2010. This part of the Dodd-Frank law did not apply to overdrafts caused by checks or ACH transactions.

You're talking about having a checking linked to a protection account, which probably has a different set of rules that you agreed to at sign-up.
posted by saffry at 1:49 PM on July 1, 2013

HSBC refused my request to just let my card be declined if there weren't enough money in my checking account. They called allowing the purchase and then hitting me with the overdraft fee "a courtesy." But a courtesy that I could not opt-out of. That was a few years ago; I hope new legislation has changed that.
posted by thebazilist at 1:53 PM on July 1, 2013

That got my antennae up, too. AFAIK the Dodd-Frank Act does not bar overdraft fees by big banks.

Section 1075 of the Dodd-Frank Act requires interchange fees to be "reasonable and proportional to the cost incurred by the issuer." Issuers with less than $10 billion in assets are exempt. But that provision applies to interchange fees, not overdrafts. And prepaid cards were exempt initially, but the exemption went away if the card imposes an overdraft fee or an in-network ATM fee. So the law implicitly acknowledges that prepaid cards may charge overdraft fees.

You can read more about this by searching something like "Section 1075 Dodd-Frank" or "Durbin Amendment."
posted by payoto at 4:21 PM on July 1, 2013