Debit card overdraft fees - it's a hot topic in this country right now.
It's got Congressman Barney Frank fired up, Senator Chris Dodd fired up and Aron Bert of Oroville steaming.
Aron Bert "very frustrated. When I walked in it was a kick in the stomach."
Bert, a customer at Chase Bank, knew he was cutting it close with some debit card purchases last month. He claims he got some bad information from bank representatives and was delayed an hour or two in depositing a couple of checks. Before he new what hit him Bert had started a tidal wave of $34 overdraft fees making numerous deposits, thinking he's caught up only to find himself in the end - 500-dollars in the hole, money this young father and husband just doesn't have.
Aron Bert " Then all the sudden to have this amount that was twice what a car payment was in the end, it just blew me away."
Beth Mills at " It's a service to our consumers and it's also a fee that's entirely avoidable."
Beth Mills represents The California Bankers Association.
Beth Mills " Really, the onus does need to fall upon the consumer to avoid spending more money than they have in their account."
It's certainly not unreasonable to expect an account holder to keep track of their balance but that's not necessarily easy to do when many banks admit manipulating the order in which they process purchases in a way that's profitable for them and stunningly costly to account holders.
If transactions were processed in actual chronological order it might look like this. A person has $100 in the checking account, though they thought they had more. In the morning they buy some coffee for $4; at lunch a sandwich for five bucks; after work $15 to top off the gas tank; $2 for a DVD rental; and a stop at the grocery store for a $110. Oops! That's too much, you've overdrafted. A$34 fee and suddenly you're $70 in the hole. And that's how you wish it would work!
In reality many banks deliberately process the larger amounts first putting you in the red immediately. And remember all those other smaller purchases? Suddenly they each come with a $34 overdraft fee, each one of them. And rather than being $70 overdrawn you're minus 206.
Both houses of Congress are considering bills that would require banks to stop manipulating the order in which transactions are processed and substantially limit the number of overdraft fees that can be incurred by an individual. And just last week the Federal Reserve instituted a new policy requiring that banks provide overdraft service only to customers who request it. But the banks themselves have initiated drastic changes to their own policies, announcing plans to no longer process larger amounts first, and stop charging overdraft fees for small purchases.
Beth Mills " (alan) Is the fact that banks are changing their policies an acknowledgement that perhaps they might have been unfair?" (beth) " I don't think it's an acknowledgement of that. I think that banks are constantly either developing or revising their programs in response to their consumers and what their consumers need."
But the changes come too late for Aron Bert, who had to go to a cash advance store just to get the money to close out his account and stop the nightmare. The whole experience has created a lot of stress in his home and left Bert shaken.
Aron Bert " I'm very paranoid right now. I check my bank account three times a day to make sure that what I checked in the morning, the same stuff is there in the afternoon because I couldn't afford to go through that again."
To avoid overdraft fees The American Bankers Association suggests having your paycheck direct deposited. Also, go Online to regularly monitor your account balance. Link your savings account to your checking account as a source of backup funds. And see if you can opt out of overdraft protection. Some banks are starting to allow it but all will be required to allow it beginning july 1st of next year.
