The New Overdraft Rules Are Still A Mystery To Many Credit Cardholder (Business Insider)   Leave a comment

 

Last year, the Federal Reserve enforced new regulations to help consumers with unfair and unpredictable changes to overdrafts on point of sale transactions. The Fed’s rules commenced on June 1, 2010. The policies do not pertain to checks or recurring debit transactions. Like the Credit Card Act of 2009, which included the most significant changes to credit card laws in decades, the new overdraft rules are ambiguous.

While the primary goal of these overdraft policies is to help consumers, credit cardholders are still unclear about many of the rules. According to the Center for Responsible Lending, a North Carolina research and policy organization, an arbitrary survey indicated that 1,000 checking account customers felt that the new rules were vague. Banks have to do a better job of explaining overdraft programs, fees and various options to consumers.

Over the years, banks have profited tremendously from debit card purchases. The report stated that several banks “use scare tactics and other misleading practices to persuade consumers to opt into high-cost overdraft programs for debit card purchases,” which can find unsuspecting consumers paying as much as $35 for an overdraft.

Prior to the new rules, if you bought an item and didn’t have enough funds to cover the cost, the bank would typically allow you to overdraw your account by up to $20 to $30. For each item paid, the bank would charge you an overdraft fee. Banks automatically enrolled customers in this type of program when they opened their accounts.

The new rules ended this practice for existing bank accounts as of August 15, 2010. Existing customers must have opted in before that date to continue to have items covered on their debit cards when they do not have sufficient funds available in their accounts to pay for them. Clients who choose to opt in still receive the bank’s standard overdraft fees for items paid with insufficient funds. When cardholders who do not opt-in attempt to purchase items with insufficient funds in their accounts, banks must decline the purchases.

If a customer opens a new account after July 1, 2010, the bank is prohibited from charging overdraft fees for debit cards and ATM transactions unless the customer opts into the overdraft program. The news laws are flexible; both new and existing customers have the option to cancel or opt in at a later date.

New rules are always tough initially. Just as credit cardholders and credit card issuers continue to adjust to the new rules from the Credit Card Act of 2009, debit cardholders and banks must adapt to the new overdraft rules. Hopefully, the government and consumers alike will work together to avoid any type of misperceptions or misunderstandings.

Read more: http://www.businessinsider.com/new-rules-take-some-time-2011-5#ixzz1LCxb5aWk

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Posted May 2, 2011 by ilanamelissagreene in Uncategorized

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