Bank of America Overdraft Protection

Bank of America Overdraft Protection

December 4, 2005

I had $40.00 in my Bank of America Savings account with a pending deposit for $200.00 - 3 checks totaling $25.00 came in and the Bank charged me $90.00 in over draft fees. When Asked why they could not transfer the funds from my savings because they said that they will use the money in savings to cover any over draft inthe checking, they said that the policy is that you need a minimum of $50.00 in savings before they canuse it to over anything in the checking account. What a rip off!! I have never seen it anywhere stated that you need a minimum of $50.00 inthe savings to cover for overdraft protection. Perhaps is is inthe real fine print. In any case when i called them they said that it's automatic and they can not do anyhting. - ofcourse! then I saw this inbthe following website: businessweek.com/magazine/content/05_18/b3931085_mz020.htm Keeley's experience is becoming commonplace as more banks turn to service fees to maintain their profits as the mortgage boom subsides. Overall, banks raked in $32 billion in account service fees last year, up from $21 billion in 1999, according to SNL Financial, a Charlottesville (Va.) research firm. At some, fees have become such a powerful source of profits that they exceed earnings from mortgages, credit cards, and all other lending combined. At TCF Financial Corp. (TCB ) in Wayzata, Minn., for example, such fees represented 76% of profits in 2004, up from 52% in 2000. This fee frenzy may seem paradoxical with so many banks trying to lure new customers with offers of

"free" checking. According to Edmund Mierzwinski, U.S. consumer program director for Public Interest Research Group, a Washington consumer-advocacy outfit, nearly 30% of banks offer such accounts, up from 17.5% in 1999. Sure, most don't carry monthly maintenance fees -- instead, customers get hit with a myriad of other fees. At San Francisco's Wells Fargo & Co. (WFC ), the fee schedule for California is 55 pages long. The charges include a $2 hit every time a customer with a

low balance calls a service rep, $20 for closing an account within six months of opening it, and $30 per

hour when a staffer helps a customer reconcile an account. Wachovia Corp. charges a $5-a-month fee for accounts that remain inactive for more than a year. "Free checking is just a come-on," contends

Mierzwinski. "Banks are making their money on the back end from hidden fees." ...... Critics also contend that bounce-protection fees, as high as $37 per transaction, are little more

than high-priced credit. "If a bank lends you $100 and charges you a $20 fee -- and then you pay the money back in two weeks -- that's an annualized interest rate of 520%," notes Jean Ann Fox, director for consumer protection at the Consumer Federation of America in Washington. "It's worse than a payday loan." Regulators are particularly worried that some banks provide the service even at automated teller machines (ATMs). Customers with $50 in their accounts and $300 in overdraft protection could be told at an ATM that they have $350 available. If they withdraw $150, the ATM will still show $170 in funds (after subtracting a fee of, say, $30). In their joint directive in February, regulators said banks should first alert customers that they will incur fees -- and give them a chance to opt out of the transaction, just as they can do to avoid a surcharge when using another bank's ATM. Most troubling to consumer activists is that most of the new fees fall on the poorest consumers. Many banks provide truly free services to wealthier clients in order to hang on to their assets. Mason, for one,

thinks the poorest 20% of the country's 135 million checking customers generate 80% of the $12 billion in annual overdraft fees. "[Banks] have turned routine fees into punitive finance charges for individuals who have trouble making ends meet," says the Consumer Federation's Fox. "IT'S OUTRAGEOUS"

Many banks defend bounce protection. Bank of America Corp. (BAC ) in Charlotte, N.C., says it started offering it after market research showed that most customers wanted it. "We've heard from customers that they'd prefer to be assessed a fee [rather] than face the embarrassment of having a purchase declined," says BofA spokeswoman Alexandra Liftman. But some banks don't charge for overdraft protection -- and execs at those banks say plans with fees gouge customers. "It's outrageous," says Dennis DiFlorio, president for retail banking at Commerce Bancorp Inc. (CBH ) in Cherry Hill, N.J. "It's not about customer convenience. It's just a way for banks to make money off customers." Commerce and others cover overdrafts automatically from savings or other linked accounts, or even charge customers' credit cards -- all without fees. Regulators are starting to act. Three years ago, Indiana state officials warned the 128 banks chartered

there that if fees worked out to an effective annual percentage rate of over 72% it "would be considered a felony." And some federal regulators warn that if banks don't pull back on some of the more egregious abuses -- such as marketing bounce protection too aggressively or providing misleading information at ATMs -- they won't hesitate to act. "If we see recalcitrant banks that don't change, you could see enforcement actions," warns one. That backlash could hurt the industry's bottom line. Bernstein's Mason believes a regulatory crackdown could eventually cause bank earnings from bounce-protection fees to fall by 20% as banks are forced to disclose more to customers. For now consumers need to remember that at many banks there's no free lunch -- or checking accounts.

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