Business

Do you know your bank’s overdraft policy?

Here’s something to consider the next time you’re shopping for a bank.

A new report from Durham-based Reinvestment Partners, a consumer advocacy group, says there are big differences in the way banks handle overdraft fees.

In issuing the report, “The Secrets of Overdraft,” the group is calling on regulators to rein in certain practices for a service it calls “far too complicated” for consumers.

You might be aware that, under federal rules that took effect in 2010, your bank or credit union can’t charge you for overdraft fees on automated teller machine or debit card transactions unless you’ve opted in to overdraft protection.

(Banks and credit unions are still able to charge you overdraft fees if a check or certain recurring electronic payments would have overdrawn your account – even if you did not opt in to overdraft protection.)

But you might not be aware that, outside of those rules, banks are given latitude to design policies governing how they charge you overdraft fees.

In one example that Reinvestment Partners notes, some banks charge a single fee when an account is overdrawn at the end of the day, while others charge overdraft fees on a per-transaction basis.

In another example of how policies can differ, some banks will not charge overdraft fees if an overage falls under a certain amount. Others don’t provide such a cushion.

The nation’s biggest banks by asset size tend to collect the most in total overdraft fees. For example, Charlotte-based Bank of America, the second-largest bank by assets, earns the second-highest amount from the fees.

Based on another calculation – overdraft fees per every $1,000 in consumer deposits – smaller banks rank highly in the first six months of 2015.

Winston-Salem-based BB&T, for example, is sixth by that measure, collecting $77 in fees for every $1,000 in deposits. Bank of America did not make the top 15, while Wells Fargo ranked 13th.

BB&T allows an account to be charged up to six overdraft fees in one day. Some other banks allow fewer fees per day, while still others allow more. BB&T declined to comment.

Overdraft fees remain big business for banks.

The industry collected $5 billion in such fees during the first six months of 2015, according to Reinvestment Partners, citing figures that regulators required banks to start breaking out in 2015. The average overdraft fee is $35, the report says.

Among the changes Reinvestment Partners wants regulators to make to banks’ overdraft practices: instituting a ban on overdrafts for ATM withdrawals and one-time debit card purchases.

In another change the group is calling for, banks could no longer process your transactions from highest to lowest amount, a practice that raises your odds of an overdraft.

Such changes should reduce fees to consumers while also creating more clarity, Reinvestment Partners says.

But any moves by regulators to make overdraft practices more uniform could face industry opposition.

Banks in recent years have touted their diverse overdraft policies as healthy for competition and consumer choice. Also, some banks have taken steps to put more overdraft protections in place for consumers. For example, in 2010, Bank of America began banning customers from overdrawing their accounts when making debit card purchases.

Regulators, for their part, are poised to push for more changes.

In a blog posting in November, the Consumer Financial Protection Bureau said it is preparing to make more rules affecting overdrafts. The regulator noted that it has previously highlighted potential concerns about overdraft programs, including how consumers opt in to the coverage.

Even if regulators don’t step in, the Reinvestment Partners report serves as a reminder that consumers worried about overdraft fees should shop around.

Deon Roberts: 704-358-5248, @DeonERoberts

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