The government has now instituted measures that would protect consumers from being charged overdraft fees by banks. ATM and debit cardholders now have to first give permission to banks before they can be assessed for overdraft charges. Banks in recent times have introduced a number of fees to consumers, many of which are thought to be unnecessary and unjust.
The legislation, which will take effect in July, represents a huge milestone in terms of consumer protection, providing a much needed relief for people in today's tough economic conditions.
The law, however, does not ensure the same guarantee for overdrawn checks. Consumers on the other hand, are shown to willingly pay for penalty fees or charges to make sure that overdrawn checks are paid. People who perform recurring debit-card transactions, such as subscriptions, monthly payments and such, are not exempted from fees as well.
Overdraft fees are proving to be a very profitable and lucrative revenue stream for banks, netting $25 billion to $38 billion a year.
Consumers, in general, prefer using checks for bill payments and using ATM and debit cards are usually limited to discretionary purchases.
Ever since the meltdown that occurred in the financial industry resulting from irresponsible business practices, there has been an increasing clamor from the public for better consumer protection laws. The administration has been quick to respond, passing relevant laws designed to strengthen consumer rights.
Congress has also issued stern warnings to regulatory agencies of massive budget cuts if found that they have been negligent in addressing consumer rights violations and implementing appropriate regulations. They are also mulling on creating a consumer protection agency that will replace inept and incompetent Federal financial agencies.
Both the Senate and Congress have been active in proposing legislation against overdraft bank fees. Senator Christopher Dodd and Representative Carolyn Maloney, have both proposed bills designed to limit banks' ability to impose overdraft charges.
The Fed on their part has initiated measures protecting credit cardholders from being charged by banks of additional fees. Lately, credit companies have increased credit annual fees and other charges and many consumers are up in arms complaining of what they perceive as abusive and unjust practices. The agency also promised to look into financial companies that are masquerading as banks and prohibiting mortgage brokers from engaging in highly deceptive practices, such as pushing costly loans.
Senator Dodd is also exasperated with the Fed's inability to regulate and monitor banks which has resulted to an explosion of fees and charges. He threatened to remove the agency's regulatory functions, citing their failure to police banks and card credit companies.