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.