Leave it to the banks to find a way around new consumer protections months before they take effect. The public outcry over exorbitant fees got so loud last year that the Federal Reserve issued new regulations that will kick in this summer and prevent banks from automatically charging customers excessive penalties for exceeding their balances when using a debit or ATM card. Now banks are employing aggressive marketing tactics to get their customers to waive the new Fed protections, sometimes in deceptive ways. This demonstrates that the banks will not willingly reform and shows the need for a new federal agency that looks out for consumer financial protection.
Banks have been making a fortune — $20 billion annually — by socking their customers with overdraft fees of $35 or more every time they use their ATM or debit card without enough money in their account. In most cases, the debit card transaction doesn't alert consumers to their lack of funds. It just allows the purchase and tacks on the fee.
Under the new rules banks must get their customers to "opt-in" to the bank's overdraft protection program. So banks are embarking on a deceptive marketing blitz involving direct mail, e-mail and phone calls to persuade consumers to opt-in. In one letter sent by Chase, the large red type tells customers to contact the bank, or after Aug. 15 their debit card may not work the same way "even in an emergency," with that part underlined.
If these fees are to continue, there should be a Consumer Financial Protection Agency to police them. The House has approved the creation of such an agency but the legislation is stuck in the Senate, due largely to Republican opposition. Too many of the nation's banks have decided they won't play fair. Only a strong federal agency looking out for consumers can make them.