Wall Street pushes overdraft fees

Debit card worries

With the government coming down hard on the way financial institutions charge fees, banks are looking at new ways to apply just enough pressure that will ensure the fees keep rolling in. But now, new concerns from consumers suggest that banks aren't playing fair, sparking a new debate about how much customers can trust their bank.

In a strategic marketing ploy, Wall Street behemoths such as JPMorgan Chase and Bank of America are engaging in an aggressive campaign that is aimed at ensuring billions of dollars in penalty income continues to flow. In an article in The New York Times, Chase's attack was highlighted yesterday. According to the article, Chase has been "fanning special letters out to consumers" that offers them a deal that the banks says they can't refuse.

The letter, reportedly issued in blood-red ink, warns consumers that their debit card may not soon work in the same way anymore, unless consumers contact the bank. "If you don't contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 - even in an emergency," it warns.

Freeze on accounts

But Chase isn't alone in its assault. One Bank of America customer told The New York Times that he had been informed that, if he tried to buy gas on his card, a gas station might place a hold on his account and he might not be able to fill up at all, even if he had enough money in the bank to cover a full tank- all because he had attempted to turn off the overdraft function on his debit card.

In fact, one Bank of America spokeswoman surreptitiously said that the bank's efforts - including giving consumers a document called "Opting Out of Overdraft Coverage" - had not been issued to encourage customers to remain in overdraft services, but to make sure that they understood the complexity of the overdraft issue.

At Chase, a spokesman said that the firm had "begun to reach out to customers and are encouraging them to sit down with a branch banker to make sure they understand overdraft services, which can be confusing. We want them to make an informed decision."

However, with such aggressive methods being deployed to get consumers into branch, the plans only stink of having ulterior motives.

Of course, in the banks' defense, amid growing public concern over overdraft fees, several large banks announced changes to their overdraft policies last year.

Bank of America, for instance, said it would not charge a fee when customers exceeded their balance by $10 or less per day and would limit overdraft fees to four per day.

And at the end of March this year, Chase has said that it will be eliminating overdrafts for customers whose accounts are overdrawn by $5 or less and has already limited overdrafts to three per day.

Nonetheless, even with those changes, customers could still incur more than $100 in fees a day if they opt to take overdraft coverage - a concern that, until it is addressed, is likely to be one of Wall Street's biggest hurdles in restoring confidence in the sector.

Matthew Buttell

Matt Buttell graduated from Bath Spa University in 2006. Since then he has written for several publications, before moving to the web. He now writes solely for the internet, continuing to cover key business issues while managing his own personal blog.

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