It's a common complaint in South Florida: High penalties and fees for overdrawing the balance in your checking account.
Today, the federal Consumer Financial Protection Bureau is launching an inquiry into overdraft programs to see how they are affecting consumers.
As part of the probe, the bureau wants public input on a sample penalty fee box -- a disclosure on a checking account statement that would highlight the amount overdrawn and total overdraft fees charged.
Here's the news from my colleague Doreen Hemlock:
The bureau's inquiry comes as studies show a jump in overdraft fees charged to consumers.
The average overdraft fee ranged from $30 to $35 last year and increased by 17 percent over the past five years, according to the Consumer Federation of America and other groups. A 2008 study by the Federal Deposit Insurance Corp. found that consumers who overdrew 20 or more times per year paid an average $1,610 in overdraft fees yearly.
For its inquiry, the bureau will seek information from banks and from the general public focused on four main areas:
Transaction Re-ordering that Increases Consumer Costs: The bureau is concerned that some financial institutions are processing the largest transactions first, thereby maximizing the number of transactions that rigger an overdraft fee. It wants to find out how prevalent this practice is and how it affects consumers.
Missing or Confusing Information: The bureau wants to look at how clearly overdraft terms are disclosed and how well consumers are informed about other alternatives to overdraft protection from other accounts.
Misleading Marketing Materials: The bureau is looking into reports that some financial institutions are sending out misleading marketing materials about overdrafts. It wants to understand how differences in the way institutions market their overdraft programs may affect opt-in rates.
Disproportionate Impact on Low-Income and Young Consumers: The bureau is revisiting the 2008 FDICstudy that found that 9 percent of checking account customers bear about 84 percent of overdraft fees. Those fees disproportionately affect low-income and young consumers.
To see the bureau's sample penalty fee box, visit www.ConsumerFinance.gov
Please let us know what you think of the sample box and the inquiry by the watchdog agency.
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