The study asserts that banks have the technology to inform customers when a particular transaction will overdraw an account and incur a fee but are reluctant to do so because it would slash their revenue. The report was written by the Center for Responsible Lending, a Durham nonprofit.

"That is really the last thing we need, another federal warning on a product," said Thad Woodard, president of the N.C. Bankers Association. "I would suggest we caution customers to balance their checkbooks and handle their personal finances very carefully so they don't overdraw their accounts."

But the report's authors say that banks are increasingly raising the fees they charge customers whose accounts are overdrawn. They also state that banks are allowing customers to withdraw more money than is in their account at ATMs and then charging them fees for going into the red.

In the past, customers using their bank's ATMs were unable to overdraw their account; the transaction was simply denied.

The change is sparked in part by banks' reliance on fees for income.

The average overdraft fee last year was $27.40, according to Bankrate.com. In annual percentage terms, that amounts to a median interest rate of more than 20,000 percent on overdrawn debit-card purchases, according to the study, which looked at the overdraft fees that banks and credit unions charge and analyzed 8,527 overdraft transactions.

That's far higher than interest rates charged by payday lenders, who were banished from North Carolina last year for charging too much on short-term loans.

Industry experts say overdraft fees are the biggest single source of fee income in retail banking. U.S. consumers pay $10.3 billion annually in overdraft charges, about $7.3 billion of which comes from "chronic borrowers living on the margins," according to the report. Further, these borrowers are more likely than other bank customers to be single, non-white and renters rather than homeowners.

Bankers contend that automatic protection saves consumers the cost of merchant fees on bounced checks. But almost half of automatic overdraft charges result from ATM and debit card purchases, for which merchant fees don't apply, said Eric Halpern, a spokesman in the Center for Responsible Lending's Washington office.

Banks also say they process overdrafts automatically as a service to customers, who would rather pay a string of $30 fees than bounce several checks.

But a survey of 2,400 checking account holders found that more than 60 percent of respondents would rather their bank deny a purchase that would induce an overdraft charge. Only 2 percent of respondents said they would continue an ATM withdrawal after a warning that it would incur an automatic overdraft fee.

"It's an injustice," said Oliver Bradley, 42, of Raleigh. "A $34 dollar fee is way too much for overdrawing by $4." Bradley, an information technology systems engineer in Research Triangle Park, said he racked up about $600 in overdraft charges in the past month because of a string of small purchases made in the red.

The center wants federal regulators to require banks to warn customers when a purchase or withdrawal will incur a fee and to provide them an opportunity to cancel the transaction.

"Do they have the technology, and can it be done? Yes," said David Robertson, an expert on electronic payment systems and publisher of the Nilson Report, a California-based newsletter that tracks debit-card, credit-card and ATM activity.

In the Triangle, some banks say they already have enough protections in place.

Capital Bank in Raleigh last year cut off the ability of customers to overdraw their accounts at the ATM. "I just had a problem with that," said Grant Yarber, the bank's CEO. He said the transactions are denied, and no fee is incurred.

Capital Bank also has started marketing overdraft lines of protection to more customers, Yarber said. Overdraft lines are a credit option much cheaper than automatic overdraft but only available to qualifying customers.

BB&T could modify its technology so that ATMs warned customers they were about to make an overdraft with a fee, said spokeswoman A.-C. McGraw. But the bank plans no changes because customers already can sign up for a program that prevents the bank from making any overdrafts. Customers also can sign up for overdraft protection where the cash is deducted from other accounts.

Wachovia customers already receive alerts of possible overdrafts on the bank's ATMs, but the bank doesn't currently have the technology to provide similar alerts to customers from other banks who use Wachovia ATMs, said spokeswoman Carol Clarke. Wachovia customers also can sign up for free balance alerts of overdrafts.

(Staff writer Dudley Price contributed to this report.)

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