With New Rules In Effect,

Consumers Should Weigh Bank Overdraft Options

WALLINGFORD — Many bank customers have been weighing in on whether they would prefer to opt in or opt out of bank overdraft protection plans and related fees.

As part of the comprehensive banking reform legislation that came into effect earlier this year, banks are obliged to receive explicit consent before covering an overdraft and charging a fee every time the service is used. Until now, banks automatically covered many transactions that resulted in overdrafts and imposed fees of $30.

Sometimes the fee was larger than the overdrawn amount.

The new rules apply only to “one-time” debit card purchases and ATM transactions. Banks are not required to obtain permission to cover overdrafts incurred as a result of payments by check, recurring credit card transactions, or scheduled online bill payments.

Banks may decide whether or not to charge customers for covering overdrafts.

Connecticut Better Business Bureau President Paulette Scarpetti says the new rule gives consumers more control over their banking preferences.

“Nobody wants to bounce a check, however not all consumers require overdraft protection and should not have to pay for it if they don’t want the service.”

If a consumer decides to opt out, a bank still may cover an overdraft but no longer charge for it. It also is important for consumers to understand banks are allowed to charge overdraft fees for repeated debits as many times per day as their policy states.

Over the past several weeks banks have sent out questionnaires asking customers’ preference about continuing overdraft protection or waiving it and running the risk of having insufficient funds in their account and having a transaction bounce.

The deadline for banks to implement the opt in process was July 1 for new customers, and is August 1 for existing clients. If you do not return a bank’s overdraft questionnaire by the deadline or otherwise express a preference, banks must automatically consider you to have opted out of overdraft protection.

Ms Scarpetti believes consumers should carefully consider their overdraft options and weigh the risks versus benefits.

A customer who meticulously balances his or her checkbook and never overdraws probably does not need the service. The same applies to consumers who have some other way to deal with overdrafts, such as having them covered by a savings account, credit card, or line of credit in the same bank.

Customers who routinely overdraw their accounts should consider whether they would benefit from the service.

A key factor is whether a customer wants to deal with a bank, business, or person who is the subject of a bounced transaction. Fees vary and many businesses may charge the maximum allowed by law.

Others may allow a second chance if you contact them directly and plead your case. For anyone opting out, debit card purchase and ATM transactions will likely be denied.

The BBB urges consumers to contact their banks for more information about their choice. More information about the new bank laws in a fact sheet is available from the American Bankers Association website at http://bit.ly/9qkVAZ. (This URL is case-sensitive)