Nearly four years after regulators began forcing banks to get permission from customers to enroll them in overdraft protection for their debit cards, a new study finds most consumers still feel blindsided when they get hit with overdraft fees.
Among people who incurred such fees last year, 52 percent did not realize they had agreed to the coverage, a study by The Pew Charitable Trusts found.
Customers who don’t opt in for overdraft protection have their debit card transactions and ATM withdrawals declined if there isn’t enough money in their account. That does not incur a fee.
The nationwide survey indicated that many consumers somehow unintentionally signed up for coverage. Pew’s director of banking research, Susan Weinstock, said standard forms that many banks use to explain coverage options are “very confusing,” and she called on the Consumer Financial Protection Bureau to step in.
“The form needs some work, and we’re hoping the CFPB edits the form to make it more clear to consumers that they are opting in when they sign it,” Ms. Weinstock said in a conference call with reporters Thursday. “Overdraft protections shouldn’t be a guessing game.”
The percentage of overdrafters who said they didn’t believe they had consented to overdraft coverage was essentially unchanged from a Pew report released two years ago.
Pew also urged the financial protection bureau to mandate that overdraft penalties be “reasonable and proportional” to the bank’s cost of covering the overdraft.
The median overdraft fee was about $35 per item, Pew said. Because dropping a balance below zero often results in more than one penalty fee, overdrafters reported paying total fees averaging $69 during their most recent overdraft.
Most transactions that triggered an overdraft were for $50 or less, the report said.
“That means consumers paid $35 so that a transaction of $50 or less would go through,” Ms. Weinstock said.
The survey found that younger, lower income and nonwhite account holders — as well as people who did not have a credit card — were more likely to pay overdraft fees.
For the full Pew report, visit http://www.pewtrusts.org.
Patricia Sabatini: firstname.lastname@example.org or 412-263-3066.