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Want Overdraft Protection? Let Banks Know

From: "Want Overdraft Protection? Let Banks Know", Clarion Ledger, LaRaye Brown, 6/27/2010

After Aug. 15, that $1 candy bar you mistakenly put on an overdrawn debit card won't come with a $30 bank fee - unless you want it to.

New federal regulations - framed in the Consumer Overdraft Protection Fair Practices Act - require that you opt into overdraft protection.

That means you have to tell your bank if you want it to approve debit card transactions when your account is too low to cover them.

The new regulation doesn't apply to checks or bills that automatically are debited monthly.
Opting into the overdraft protection means your card will not be declined but you will incur an overdraft charge. According to, the average overdraft fee rings in at $30. Moebs Services puts it around $27.

Katrina Morris, a 30-year-old Jackson resident, said she opted in.

"I never overdraft," she said. "But just in case."

Ann Pringle, a 45-year-old Jackson resident, said she doesn't use overdraft but would discuss the option with her husband.

Banks have until Thursday to create a method of getting new customers to opt in or opt out and until Aug. 15 to have decisions from their existing customers. Not responding is the same as opting out of coverage.

"I don't think there are any drawbacks for the consumer," said Bill Moak, president and CEO of the Better Business Bureau of Mississippi. "Consumers are getting the option to make a choice - whether they opt in or opt out of overdraft coverage."

Mike Moebs, economist and CEO of Moebs Services, predicts the regulation will spur at least two waves of responses: second thoughts from those who opted out and smaller financial institutions dropping their fees to attract more consumers.

Area banks don't have tallies but say many consumers are choosing to have the coverage. At Magnolia Federal Credit Union, about 36 percent of customers responded after an initial e-mail blast. Among those, 84 percent opted to have overdraft protection, said Lanet McCrary, vice president of marketing and business development.

"We've still got some work to do," CEO Stephen Pollman said, "but it's coming along real well."
Moebs predicts about 95 percent of customers will opt into the coverage. Among the 5 percent who opt out, Moebs predicted about a fifth of those will change their minds after their cards are declined.
Some, he said, will reason that leaving empty-handed costs them in time and stress, making overdraft charges worthwhile.

Even as advocates, officials and consumers are debating the new regulation, some national banks are curtailing overdraft protection programs and will simply decline those items.

The big banks' policy change potentially creates a new pool of customers for smaller institutions, Moebs said.

This may be the one time the federal government has commanded banks to get responses from each personal checking account holder. In past changes, consumers simply had to be notified.

Many banks began notifying customers of the change via mail or e-mail. Customers who didn't respond may get a phone call from their banks.

Given that notification is continuing, implementation's final price tag is months away, but it could be high. Moebs estimates banks with $400 million in assets or less may absorb $1 million to $2 million in costs - including computer changes.

Some banks may raise fees to absorb the expense, he said.

Acknowledging the new regulation could be confusing and that all bank employees would get questions from the public, Trustmark trained all of 2,600 of its employees - even those who don't work directly with customers, spokeswoman Melanie Morgan said.

Therefore, all employees will be prepared when they get questions from the public, Morgan said.

Customers have been hit with sticker shock when they opened bank statements to find relatively inexpensive items came with overdraft charges.

Those who don't decide by Aug. 15 may be surprised with a denial on Aug. 16.

As BancorpSouth's David Barrentine reminds, even those whose overdraft is tied to another account or a line of credit can be affected by the policy.

If there isn't enough credit or money in the secondary account, those who opt out can be declined, said Barrentine, a regional president with the bank.

Mac Deaver, president of the Mississippi Bankers Association, said opting out puts the responsibility of covering debit transactions solely on the consumer.

Written By: m.moebs
Date Posted: 8/25/2010
Number of Views: 3038