Nine banks under the scanner for overdraft fees

By the end of 2012, the Consumer Financial Protection Bureau intends to rewrite certain regulations that were brought into effect two years ago. To aid in this, this agency is currently reviewing the banking practices being followed by certain leading banks in the country such as JP Morgan Chase, Wells Fargo and Company and the Bank of America Corporation.

The current inquiry is aimed at finding out how banks persuade consumers to sign up overdraft protection programs. The executives on the evaluation panel are taking a closer look at marketing materials that have been mailed to customers and also that was sent online. The scripts that were being used by the customer service representatives are also being reviewed as a part of the evaluation process since they could be confusing and misguiding at times.

Jo Ann Barefoot from Treliant Risk Advisors based out of Washington said that the examiners from the bureau have told that this move could work in the favor of borrowers.

Though more stringent norms may work in the favors of consumers in the United States, it certainly does not bode well for the banks that are already facing revenue loss from various quarters due to various changes in the banking policies in recent times. With the most recent move to cap the interchange fees, banks have loss millions of dollars of revenue. According to the data from Moebs Services, a research firm based in Illinois, banks accumulated revenue of $31.6 billion through overdraft fees in 2011. Though this was lesser than $33.1 billion amassed in the year 2010, it was still on the higher side. The firm also mentioned that each year close to 15 million American consumers end up overdrawing their accounts.

Two people who are closely associated with the entire process also said that the examiners were also evaluating the justification being provided by banks for charging excessive overdraft fees. While credit unions and community banks charge close to $25 as overdraft fees, there are certain other banks that charge up to $35 for every overdrawn account. The overdraft policies also vary from one bank to the other based on various parameters.