In the last few years, banks have been charging fees for overdrafts that can range from $35 to as much as $75. The Consumer Financial Protection Bureau has been investigating these practices and is considering a rule change to ban them.
On December 4, 2017, the bank of america login published a report on the investigation into bank and credit union overdraft fees.
What Is an Overdraft Fee and How Do I Avoid It?
A bank, credit union, or other financial institution may impose an overdraft fee to transfer money from a checking account to a checking account to pay for a transaction. This transfer may come from a connected money market or checking account, or it could be the consequence of a financial institution loan. After that, the bank or credit union will charge a fee for the transfer or loan. Insufficient funds fees, courtesy pay costs, and other terms may be used to describe overdraft fees.
Customers must actively opt-in to the overdraft protection or overdraft coverage program before banking institutions may charge them overdraft fees as of Aug. 15, 2010.
What Is an Overdraft Fee and How Much Does It Cost?
The amount of overdraft fees charged and the overdraft protection plans provided by banks and credit unions differ.
For example, Overdraft Protection and Overdraft Privilege are two overdraft coverage alternatives offered by Sterling Bank, a subsidiary of Synovas Bank chartered in the state of Georgia and operating under various identities across the Southeast.
Customers who enroll in the Overdraft Protection service at Sterling Bank may have money automatically transferred to their checking account from another account, a credit card cash advance, or a line of credit (LOC) previously established with the bank.
When connected to another bank account, there is a $10 per transaction overdraft charge, and when linked to a Sterling Bank credit card or LOC, there are extra costs and interest.
Sterling Bank imposes an overdraft charge of $36 per transaction, up to a maximum of $1,000, to cover a transaction with Overdraft Privilege. Overdraft Privilege is available on all Sterling Bank business checking accounts.
Even if a client has signed up for Overdraft Protection, such as a connection to another account, if the Overdraft Protection sources are depleted, Overdraft Privilege is still accessible as supplementary overdraft coverage.
Additionally, Sterling Bank’s website says that if goods are provided that cannot be returned unpaid, they may alter the posting order of payment, retaining the right to adjust how they pay transactions from a customer’s account.
On its website, Sterling Bank describes how it works:
“We apply your deposits and other credits to your account once the business day ends. Then we deduct any fees or charges that are due to us. Finally, we subtract all of the goods that have been offered for payment. The sequence in which these things are taken from your account balance is determined on the kind of transaction and, in the case of electronic transactions, whether you executed or we received the transaction.”
What is the purpose of the Overdraft Protection Act?
In 2010, the rules for overdraft protection were modified. Most banking institutions automatically enrolled clients in overdraft protection before the Overdraft Protection Law was enacted. The Federal Reserve then adopted the Overdraft Protection Law in July 2010, prohibiting banks from automatically enrolling clients and instead requiring banks to notify customers that they may opt in or out of overdraft protection services at any time.
This legislation only applies to non-preauthorized transactions like ATM withdrawals and debit card transactions. Pre-authorized withdrawals, such as automated bill payments and checks, are not covered by the Overdraft Protection Act and may result in an overdraft charge.
The banks near me is an investigation by the Consumer Financial Protection Bureau (CFPB) to find out how banks and credit unions are charging overdraft fees.
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