Banks On Track To Rake In $16B From Overdraft Fees This Year

Despite bank officials wailing about how financial reforms may hurt their bottom line, banks will rake in billions this year thanks to fees they're charging consumers for overdrafting.

Banks are slated to rake in $16 billion in overdraft fee revenue this year, according to Bloomberg Businessweek. That's down 16 percent from their 2009 peak, in part because last summer the Federal Reserve began requiring banks to get customers' permission to enroll in overdraft protection, instead of enrolling them automatically, according to USA Today.

Even with the change, customers are still getting hit hard by the fees. The average overdraft fee remains $35, the same as it was last year, according to a survey from the Consumer Federation of America.

The Center for Responsible Lending, a consumer advocacy group, accused banks earlier this year of engaging in marketing campaigns that inappropriately encouraged customers to opt into overdraft protection, according to AOL Daily Finance. The banks have been criticized and even faced lawsuits for their practices, including processing payments from largest to smallest, forcing the consumer to incur more fees, AOL Daily Finance reports.

Bank of America paid $410 million to settle a federal lawsuit alleging that the bank charged excessive overdraft fees, earlier this year and Wells Fargo and Citibank have faced similar suits, according to Bloomberg.

Big banks have more recently come under fire for upping fees on once-free checking account services. Bank of America roiled consumers after announcing that it would charge a $5 per month fee for debit card purchases starting in 2012. Wells Fargo is testing a $3 debit card fee and Citibank announced in August that it would start charging a fee on some customers for low account balances.

Banking officials claim that they need to charge the fees in order to recoup lost revenue as a result of new financial reform regulations. Brian Moynihan, Bank of America's CEO, publicly defended the debit card fee saying that the company has a "right to make a profit."

Profit it certainly did. Bank of America reported $6.2 billion gains in the third quarter compared to a $7.3 billion loss for the same quarter last year. Citigroup's net income rose 74 percent to $3.8 billion in the third quarter.

President Barack Obama has criticized the banks for boosting customer fees in an effort to rake in more money. In an interview with ABC News, Obama said that banks were mistreating their customers by charging the fees.

Comments

[oldmole1861]

08:40 AM on 10/25/2011

The Invisible Hand of the Free Market is pleased, for He cherishes Sacred Profit. May He be unregulated, yea unto the seventh generation!

[Rita F Real]

08:37 PM on 10/24/2011

Our firm now gives 10% discount for cash. and because of that we hired an out of work bookkeeper to handle all the money (green stuff) we now receive.

[Adam Matteuzzi]

01:20 PM on 10/24/2011

Just a warning those with overdraft protection it only stops once you go negative than there is still 1 fee.

[Adam Matteuzzi]

01:14 PM on 10/24/2011

Money that could have been used on food cloths instead it went to the fat cats.

[rondohatton2012]

12:00 PM on 10/24/2011

Keep track of your balance. Buy a calculator.
Stop writing bad checks.
It ain't rocket science.

[builderman55]

10:31 AM on 10/24/2011

What is the REAL cost to a bank for an overdraft? Does anyone out here know the answer? It seems that there should be a law that an overdraft cannot exceed a percentage of the overdraft itself. The way it works now, a $10 overdraft costs $33. Obscene...

[rondohatton2012]

12:00 PM on 10/24/2011

Why don't you stop writing bad checks? Then it would cost you nothing.

[ScottV]

02:51 PM on 10/24/2011

It's like paying for text messaging, it costs them nothing.

[bynddrvn5]

09:22 AM on 10/24/2011

Won't be enough, all of the largest banks would be insolvent if the assets they are carrying were valued at the current market price.

Derivatives exposure of the largest banks, as a percentage of assets (see link below). Notice how a small percentage of bad bets in the derivatives markets can wipe out these bank's ENTIRE book of assets?!
http://seekingalpha.com/article/198399-big-five-most-vulnerable-to-derivatives

[earlgray1787]

09:00 AM on 10/24/2011

1984'
"A hideous ecstasy of fear and vindictiveness, a desire to kill, to torture, to smash faces in with a sledge hammer, seemed to flow through the whole group of people like an electric current, turning one even against one's will into a grimacing, screaming lunatic. And yet the rage that one felt was an abstract, undirected emotion which could be switched from one object to another like the flame of a blowlamp."

[windancin]

10:10 PM on 10/23/2011

Wow...it's BANK ROBBERY...­.from the INSIDE !! And the law does...NOT­HING ! How is this any different than THEFT ? I'm in my 60's....cl­osed my bank acccount. I manange my own $$$, which isn't much anyway on Social Security..­..which is another form of THEFT !!! Many don't realize that some banks charge you $10 to transfer funds from your Savings account to cover any insufficie­nt fund transactio­n(s) in your checking !!! I used to call the bank, transfer the funds from Savings myself....­just so they couldn't RIP ME OFF for MORE of my SS income....­this IS a crime.....­and should be STOPPED !! ****Be careful when voting....­the Govm't wants all the SS checks to be 'paperless­'....funds to be put onto a bank card or money card (ATM).­...AND, guess what...they're gonna CHARGE you 1% for EVERY transactio­n done on your card..and more !! Check it out BEFORE voting on this one...another hidd­en rip-off...AGAI­N !!!

[John Goucho]

09:29 PM on 10/23/2011

This reminds of the leather seat problem in cars. Car companies are making BILLIONS this year by convincing consumers to buy cars with leather seats, automatic windows, bigger engines, and upgraded paint jobs. We must stop them now! They are spending billions marketing these items to us and forcing us to buy.

If you want to stop overdraft fees. 1) Dont sign up for overdraft protection 2) Dont overdraft

[vippy]

08:58 PM on 10/23/2011

Not feeling sorry for anyone who gets hit with these either justified or unjustified charges.  Be smart and change to a local bank or credit union!

[Adam Matteuzzi]

01:17 PM on 10/24/2011

It effects the economy. Money that could have been circulating is now in the hands of fat cats.

[DennyHayes]

06:41 PM on 10/23/2011

Interesting! I do not have overdraft protection on any of my accounts, but they still pay out when there is not enough money to handle a transaction. But they charge a fee of over 40 bucks, called overdraft fee. I have told both Chase and Comerica not to payout if there is not enough money there. With my company there will be a couple hundred grand at one time and then a few days later it is over drafted paying employees, and for job supplies. I guess there is no way to stop them from charging these fees. If my paymaster writes a check or does s bank transfer to pay someone, and there is not enough money, I wish they would just not honor the payment

[DennyHayes]

06:10 PM on 10/23/2011

Why to banks feel they deserve a profit for doing nothing and when it is little or no cost to them. If you over draft, what does it really cost the bank? It's as if they feel their profit should never go down, regardless of what consumers do. Maybe they should charge a fee when you walk in their door, because they then need to clean their floor. And regardless of any new regulations you can't even opt out of overdraft protection. The banks all tell me that only covers certain kinds of overdraft. One bank says it is only for credit card purchases, and another tells me that is only for check transactions.

[rondohatton2012]

12:03 PM on 10/24/2011

Denny, your trying to rationalize your bad checks.

[yoozum]

11:43 AM on 10/23/2011

Pro tip: don't overdraft.

[alunsulen]

02:54 PM on 10/23/2011

Don't preach personal responsibility to the libs. They will howl and threaten to kill you.

[Jazzbeau]

05:38 PM on 10/23/2011

You mean like the "personal responsibility" shown by the executives of the big banks and brokerages when their greed and ineptitude nearly destroyed the worldwide economy less than three years ago?

Or maybe that shown by going to the government for a multi trillion dollar handout with the threat that they were too big to be allowed to fail?

Or was it the contention that they couldn't make loans to help get the economy moving without trillions of government dollars and then sitting on most of the money?

Yes, there is Socialism in this country all right. Socialism for the rich and well connected and dog eat dog "free market capitalism" for everyone else.

You, sir, with your knee jerk reaction are, like most of your ilk, a hypo©rite.

[UmmmHummm]

11:27 AM on 10/23/2011

Hey, I may not be the most finanically savvy among us, but if I make 16 Billon off of your NSF misfortunes and pay out 410 Million to settle your lawsuit against me, shoot, I'm good. I'll take a 15.6 Billion net any day!! Did I hear someone say, "Credit Unions?"