The little guys and gals scored a victory as Woodforest Bank has agreed to refund $12 million to customers who were charged excessive overdraft fees. While a positive sign, this is just another reason that we need financial reform that will help us the consumers.
OTS (Office of Thrift Supervision) spokesman William Ruberry said Woodforest was incorrectly marketing overdraft protection as free, when it was really charging $34 per overdraft, plus additional daily fees if a customer failed to pay off the original penalties. Woodforest was also offering loans to repay overdraft fees, and the bank was requiring automatic account deductions to repay the loan. Such a requirement is against federal rules.
Under the order, Woodforest has to limit fees and the number of transactions for which it can charge fees, overhaul marketing materials and clearly disclose rules, stop claiming that overdraft protection is good for people who've had financial trouble and give customers a chance to stop additional daily charges on overdrawn accounts.
Woodforest has a lot of banks in Wal-Marts throughout the country.
Yes refunding $12 million to customers and hitting the bank with a $400,000 fine will certainly be a first step in an issue that has plagued millions of Americans. There are some proposed new rules on overdraft protection
OTS is seeking comments on new rules on overdraft protection, calling on savings banks to:
* Discourage customers from routine or intentional overdrafts.
* Explain the program.
* Alert customers before charging any fees.
* Stop posting larger withdrawals first to maximize fees.
* Impose daily limits on fees.
* Do not impose fees that are much higher than the actual overdraft.
I have a fundamentally moral problem with charging fees that are higher than the actual overdraft. The banks should not excessively profit from a mistake. Ten dollars in gas to get to work should not cost you an additional $34 or $36 dollars. Also you should certainly have to option as to whether or not you want to opt-in or out to overdraft programs.
Last month Bank of America took the lead in eliminating the ability to overdraw your account with debit card purchases.
While some steps are being taken, we still need to monitor this issue and make sure that consumers are going to be protected enough.