NY1 For You: Consumer Officials Crack Down On Banks' Forced Overdraft Fees
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The City Department of Consumer Affairs has deemed deceptive enrollment in so-called “courtesy overdraft” protection to be a top fraud of the year, and such enrollments will start violating federal bank laws on July 1. NY1's Susan Jhun filed the following report.Until recently, many New Yorkers have been unknowingly enrolled in overdraft services by their banks, and have been paying a dear price.
"Last year, Americans spent over $38 billion on overdraft services in their checking accounts, generally for services they didn't know that they had gotten, that they had never requested, that were way too expensive," says City Department of Consumer Affairs Consumer Jonathan Mintz.
Such fees can average $30 to $35 for a $20 transaction.
"Banks were just signing people up for these overdraft services without even asking them. After July 1, that's finally going to be illegal," says Mintz. "The real question now, is what are we going to do about the banks that get aggressive in the ways that they encourage people to sign back up."
The banks can use high-pressure tactics, such as mailings with bright red lettering urging that a response is needed, warnings of changes to one's checking account, or deceptive text message solicitations.
"Those are aggressive sales tactics. It's one thing to be aggressive, it's another thing to really misrepresent the choice that people have," says Mintz.
The DCA has appealed to the Federal Reserve to prohibit financial institutions from deceptive marketing, and in an effort to provide New Yorkers with an alternative banking option, the city created the NYC SafeStart Bank Account.
"We have 10 different institutions you can choose from that are offering this account -- banks, credit unions, whatever you like," says Mintz. "But the important thing about this account is that you can't overdraw it. There will be no unpredictable fees, there will be no surprises."
Beginning July 1, banks will be required to obtain customers' consent before enrolling them in overdraft protection.
DCA is asking New Yorkers to send any marketing materials, such as e-mails, advertisements, text messages and any other communication from banks that urge customers to keep overdraft protection plans. Hard copies can be mailed to 42 Broadway, 8th floor, New York. NY 10004 or e-mailed to overdraft@dca.nyc.gov.
For more information about the NYC SafeStart Bank Account, which is available to all New Yorkers, call 311.