James Charles reports for Times Online (UK) that several of the largest UK banks are increasing monthly fees on current accounts by up to 20 percent in advance of a ruling by the Office of Fair Trading (OFT) capping overdraft fees.

In an editorial yesterday titled The Fed Aims at Credit Cards, the New York Times responded to the Fed's announcement on Friday about rule changes to address what it called "unfair practices" by credit card issuers and retail bank overdraft fees. The editorial called the proposed rules a "modest step forward" and quoted Rep. Carolyn Maloney of New York (author of her own "Credit Cardholder's Bill of Rights" legislation) saying "there are abusive, abusive, abusive practices going on now."

Earlier today, the Federal Reserve proposed new rules to prohibit unfair practices regarding credit cards and overdraft services. that would, among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances.

In addition, the proposed rules addresses practices in connection with a bank’s payment of overdrafts on a deposit account, whether the overdraft is created by check, a withdrawal at an ATM, a debit card purchase, or other transactions. The proposed rules require institutions to provide consumers with notice and an opportunity to opt out of the payment of overdrafts, before any overdraft fees or charges may be imposed on consumers' accounts.

The Fed has been joined in putting forth these proposed changes by the Office of Thrift Supervision and the National Credit Union Administration.

The Fed has provided a seventy-five day comment period - to approximately mid-July. Providing your comments to the Fed is easy:

• On the Fed's web site (scroll down to the bottom of the page to Regulation AA - click on submit comment)
• By email to: regs.comments@federalreserve.gov
• By fax to (202) 452-3819 or (202) 452-3102
• By regular mail to:

  Jennifer J. Johnson
Secretary, Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551

Be sure to reference Docket No. R-1314 in your written comments.

All comments will be public and can be viewed online on the Fed's web site. Pro or con - this is an important payment card industry issue worth your comments.

Adam Levitin writes on the Credit Slips blog about his take on the proposed Fed/OTS/NCUA Credit Card Regulations. "Some of the proposed rules are quite favorable for consumer interests. Others do not go far enough, however, and perhaps most importantly, there are several major issues that the proposed rules simply do not address."

Edward L. Yingling, president and CEO of the American Bankers Association, issued a press release today discussing the Federal Reserve's proposed rules regarding credit card practices and overdraft fees saying: “The Federal Reserve’s proposal is an unprecedented regulatory intrusion into marketplace pricing and product offerings. We are deeply concerned that these rules will result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards. In short, everyday consumers will bear the real cost of these proposals.   » Continue Reading

The Federal Reserve Board has announced proposed new rules to 'prohibit unfair practices regarding credit cards and overdraft services that would, among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances.' The Fed is acting in concert with the Office of Thrift Supervision and the National Credit Union Administration in pursuing these new rules.

"The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate," said Federal Reserve Chairman Ben S. Bernanke. "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."   » Continue Reading

The National Credit Union Administration (NCUA) Board has announced it has approved a joint proposed rule prohibiting credit card and overdraft service practices as unfair or deceptive under Section 5 of the Federal Trade Commission Act.

The Office of Thrift Supervision (OTS) has announced it has approved a proposal to prohibit savings associations from engaging in unfair or deceptive acts or practices regarding credit cards and overdraft services that violate the Federal Trade Commission Act. The Federal Reserve Board and the National Credit Union Administration are expected to also approve the proposal shortly.

According to the OTS, the joint proposal addresses practices that have raised concern about fairness and transparency. For credit cards, the proposed rule would address: (1) unfair time periods for making payments; (2) unfair payment allocations; (3) unfair interest rate increases on outstanding balances; (4) unfair fees from credit holds; (5) unfair methods of computing balances; (6) unfair security deposits and fees charged to an account for the issuance of credit; and (7) deceptive offers of credit. For overdraft protection services on deposit accounts, the proposed rule would address: (1) a consumer’s ability to opt out of overdraft services; and (2) unfair fees for debit holds. A summary of the proposed rules is available online.   » Continue Reading

Consumer groups have been active in the US pointing out the overdraft charges that banks charge their checking account customers for non-sufficient funds. In the UK, the issue has been litigated and the BBC reports today that "the UK's biggest banks have lost a test case about overdraft charges." The Guardians headline reads "Customers in line for billions as banks lose unfair charges case." The court decision is available online .

The Center for Responsible Lending has published results from a survey titled 'Consumers Want Informed Choice on Overdraft Fees and Banking Options' conducted by Opinion Research Corporation that found 'respondents overwhelmingly prefer that debit card purchases be declined at the checkout if these would otherwise result in an overdraft fee.'   » Continue Reading

As covered by the Washington Post on Saturday, the Government Accountability Office has released a new report titled "Bank Fees - Federal Banking Regulators Could Ensure That Consumers Have Required Disclosure Documents Prior to Opening Checking or Savings Accounts" . The study had been requested by Rep. Carolyn B. Maloney, Chairwoman of the Subcommittee on Financial Institutions and Consumer Credit in the US House of Representatives.

In an article titled 'Banking Fees Are Rising and Often Undisclosed', Tomoeh Murakami Tse writes for the Washington Post's Sunday edition about a new report to be issued on Monday by the Government Accountability Office. 'The GAO report says the percentage of income at banks and thrifts derived from "noninterest sources," which include fees, rose to 27 percent in 2006 from 24 percent in 2000. Increased consumer use of electronic payments, as well as increased marketing of automatic overdraft protection programs, are likely contributing to the trend, the report says.'

The California Reinvestment Coalition (CRC) announced a new report that it says "reveals how the complicated and deceptive overdraft policies at California's biggest banks allow them to reap huge profits from their mostly working class account holders."   » Continue Reading

With the headline "Banking fees soar again in 9th Annual Checking Study", Bankrate.com has published the results of its latest survey of fees associated with bank checking accounts. Among its findings, the survey reported that "the average cost of a bounced check, often referred to as a nonsufficient funds fee, climbed 3 percent since last year's survey to a record high of $28.23."

In a new report titled "Billion Dollar Deal", the Center for Responsible Lending says that "millions of college students and other young adults aged 18 to 24 have become unwitting participants in overdraft loans that cost them nearly $1 billion a year in fees."   » Continue Reading

Consumer Reports has published an article titled "The dark secrets of debit" that explores the growth in debit card usage, explains the difference between signature and PIN-basd debit, and points out how banks are making money by not declining transactions but, rather, charging overdraft fees when funds aren't available in the consumer's account.

Detroit Free Press columnist Susan Tompor writes about needing to be careful using debit cards - to avoid bank overdraft charges. She writes "in the last few years, banks and credit unions began allowing more debit card purchases to go through at checkouts as a convenience to consumers, even if there is not enough money in the checking account."

The press continues having a field day with the checking account overdraft fee/overdraft loan issue recently highlighted by the Center for Responsible Lending. In the Atlanta Journal-Constitution, Péralte C. Paul explores the issue - saying "for those who are checkbook challenged when it comes to balancing the all-too-important checking account, that $4 Starbucks latte can end up costing that much plus another $30 in overdraft charges if the funds to cover it are lacking."

Michelle Singletary, personal finance columnist for the Washington Post, follows up on the "Out of Balance" report from the Center for Responsible Lending last week and says that "many users have discovered, the debit card has the same problem as its credit card cousin -- you can spend over your limit, causing yourself all kinds of financial havoc." She suggests that financial institutions should "restrain their fee frenzy".

The press is picking up on the Center for Responsible Lending's report on bank overdraft fees and overdraft loans. The CBS Evening News covered the story In an article titled 'Debit Cards' Hidden Fees" citing the study's conclusion that "the single largest use of overdrafts was using your debit card. And those debit card purchases are very small. If you were to calculate an annual percentage rate interest for that loan, it would usually be well into the five digits."   » Continue Reading

The Center for Responsible Lending has published a study titled "Out of Balance" (PDF) saying that "In a system enormously out of balance, consumers pay $17.5 billion in fees for $15.8 billion in abusive overdraft loans. In addition, the report finds that debit card overdrafts are now the single largest source of overdraft fees." See Jim Bruene's commentary on this issue.

Wesabe has announced that "its member-owned financial transaction database is the largest of its kind in the world, with more than $500 million in transactions. The company gave several examples of how it is putting that data to work, revealing which major banks charge its members the most in overdraft fees (Wachovia and U.S. Bank). Wesabe also reported the types of member purchases that give the most satisfaction (outdoor and camping), and showed that purchases in industries where there is the least competition, such as phone, utilities and cable, give the least satisfaction."   » Continue Reading