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CFA backs overdraft fee legislation
10/30/2009
Recently, an organization expressed its support of the idea of Congress passing measures to limit the practice of assessing overdraft fees, which are seen as hurting a consumer's ability to handle debt management.
Jean Ann Fox, the director of financial services for the Consumer Federation of America, told the House Financial Services Committee that overdraft protection policies give lenders the ability to make additional money on fees at the expense of consumers, adding to their money management problems.
"Consumers do not apply for this form of credit, do not receive information on the cost to borrow bank funds via overdrafts, are not warned when a transaction is about to trigger an overdraft, and are not given the choice of whether to borrow the funds at an exorbitant price or simply cancel the transaction," Fox said.
Overdraft protection programs will often apply high fees when consumers commit transactions that go beyond the amount of funds they have in an account. Even if the transaction is small, consumers are charged, with the median fee being $35. Lenders may also reorder transactions in order to make it more likely people overdraw their accounts.
Members of Congress are considering forcing lenders to get an account holders' permission before enrolling them in the overdraft protection programs.
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