Have you ever accidently overdrawn your bank account and been subject to a hefty overdraft fee from your bank?
The good news is that federal law now provides new protections, which prohibit banks from charging overdraft fees without your consent. Thus, banks can no longer charge you overdraft fees unless you agree to participate in the "overdraft service."
As an alternative, banks should provide you an opportunity to choose an "overdraft protection service" in order to avoid overdraft fees.
A bank’s "overdraft service" allows you to spend more funds than you have in your account. You are usually charged an overdraft fee for the service.
Alternatively, you can choose "overdraft protection," which protects you from over-drafting your account by linking your checking or savings account to a credit line to cover overdrawn amounts.
In order for you to opt-in to the overdraft service, the bank must:
- Provide you notice of the overdraft service
- Give you a reasonable opportunity to consent to the service
- Provide express written consent to opt-in to the overdraft service
You can validly consent to a fee-charging overdraft service through mail, in person, or by checking off a box online.
The Federal law prohibits banks from charging overdraft fees for ATM withdrawals and one-time debit charges without your consent. However, the Federal law does not protect you from fees for over-drafting your account on automatic bill payments, money transfers, or check payments.
The notice of the overdraft service from the bank must include:
- A description of the overdraft service, including the types of transactions it covers
- The amount of the overdraft fee
- The maximum number of fees that can be charged per day
- An explanation of the right to consent to the overdraft service
- The availability of an overdraft protection service as an alternative
All of this information must be separated from your other agreements with the bank. Thus, they can’t just hide the overdraft consent language in with other information related to your banking agreement.
If you were charged an overdraft fee and you don’t remember getting notice or consenting to the overdraft service, you can always contact a banking representative to contest the fee.
However, in the age of the internet, we have all become very accustomed to checking "I agree" boxes without reading what were agreeing to – so there is always the possibility that the bank did "validly" obtain your consent online at some point.
Still, to protect yourself from future fees, you should be able to enroll in an overdraft protection service, which will automatically link your checking and savings account to a credit line for any overdrawn amounts.
If you think you have been unlawfully charged an overdraft fee, you should contact your bank and attempt to resolve the issue. If your bank will not cooperate and you have lost a large amount of funds due to the unlawful charges, you should contact a financial attorney to resolve the issue.