Banks will no longer be allowed to automatically enroll customers in overdraft protection plans starting July 1, federal regulators announce.
Banks will no longer be allowed to automatically enroll customers in overdraft protection plans starting July 1, federal regulators announced Thursday.
The plans allow people to charge more on debit cards than they have in their account, but can make even small purchases cost a lot more.
Mindy Vargas of Garland said she was outraged when a $7 fast-food meal ended up costing six times that amount.
“(It) makes me furious,” she said. "I feel like I'm being gouged."
Her bank charged her a $35 overdraft fee because she did not have the $7 in her account at the time. Total cost of the meal: $42.
Vargas, a legal secretary, said she frequently goes online to check her account balance.
"I have to be careful with it, because I'm on such a tight budget,” she said.
Another time, her bank, Bank of America, charged her three overdraft fees – a total of $105 -- after a mixup over a pending charge and a paycheck, Vargas said.
"My deposit had gone in the same night,” she said. “The same night, they charged me three overdraft charges."
Some banks, including Bank of America, give customers the right to opt out of overdraft protection, so if the money is not there, the charge won't be approved.
But starting July 1, customers will have to choose to participate -- without banks automatically signing them up.
"I'll be very happy to see this happen,” Vargas said.
Bank of America’s policies are transparent and fair, said spokeswoman Anne Pace. She did not discuss Vargas’ specific case.
The banking industry has defended the practice as providing a protection for customers.
Banks are expected to earn $38 billion in overdraft fees this year.