Senate Panel Frowns On ATM, Debit Overdraft Fees
By Kristina Peterson, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- Consumer groups, lawmakers and a top banking
executive agreed Tuesday that financial institutions shouldn't charge overdraft
fees to customers using debit cards or ATM machines.
Consumer advocates, a senior Citigroup Inc. (C) executive and many members of
the U.S. Senate Banking Committee concurred at a Tuesday hearing that overdraft
fees are abusive when levied on customers making ATM or debit card transactions
without sufficient funds in their bank accounts.
The committee is considering a bill that would curb overdraft fees by limiting
them to one per month and six per year, restricting the fees to a "reasonable
and proportionate" amount and requiring consumers to give their written consent
before obtaining overdraft coverage.
"The service of overdraft protection often serves as nothing more than a way
for banks to profit by taking advantage of their customers," said Chairman
Christopher Dodd (D., Conn.).
Citigroup doesn't charge overdraft fees for ATM and debit card transactions,
but does for bounced checks, said John Carey, the chief administrative officer
of Citigroup's North America Consumer Banking department. The bank would prefer
to have customers make the decision whether to accept an overdraft fee at the
time they are making the ATM or debit card transaction, Carey said. As current
technology doesn't enable instant notification, banks should simply refuse to
let overdrawn transactions occur, Carey and Democratic lawmakers agreed.
But the group split over the proper order in which banks should process
transactions. Banks often start with the biggest payments, draining a customer's
account and multiplying the number of overdraft fees charged, said Jean Ann Fox,
director of financial services at the Consumer Federation of America.
"These small loans come at astronomical costs," Fox said.
Carey said the transaction order is a reflection of what customers want.
"The higher price transactions are the ones that are the most important to the
customer: the mortgage payment, the car payment," Carey said in an interview
before the hearing.
Dodd used the issue to highlight the need for a consumer financial protection
agency. He proposed an independent regulatory agency geared toward consumer
interests in a regulatory overhaul bill he introduced last week.
"This is a further example of instead of waiting around hoping and praying for
a bill to get passed by Congress, we should have responsible people and a
responsible regulatory body making these decisions," Dodd said.
Sen. David Vitter (R., La.) cautioned that the bill could make banking
services more expensive for all customers.
"If that's the case at the end of the day we're going to shift costs from less
responsible consumers to the entire class of consumers," Vitter said.
-By Kristina Peterson, Dow Jones Newswires; 202-862-6619; kristina.peterson@
dowjones.com
(END) Dow Jones Newswires
11-17-091748ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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