ATM Overdraft Fees Banned by Fed

Unless a user specifically opts into the service, effective July 1st, banks will be banned from charging overdraft fees on ATM and debit card transactions.  Overdrawn checks will not be affected by this ban.  As we mentioned previously, this may have a drastic affect on how many banks make money.

According to Reuters:

ATM and debit card transactions are typically discretionary purchases, the officials said. Consumers frequently use checks for bills that they want paid no matter what.

Bank regulators have been under pressure to beef up consumer protections following a financial collapse brought on in part by reckless lending practices. Lawmakers critical of regulators’ failure to rein in those practices are considering stripping consumer protection functions from the Fed and other financial regulators and entrusting them to a dedicated consumer protection agency.

This may spell the end of free checking accounts.  Banks will no longer be able to cover the cost of offering checking service to consumers without some source of income.  Of course, banks may just as easily find a way to force users of their accounts to opt-in to the overdraft service before receiving an account.  Should this be the case, the benefit to consumers remains minimal at best.

photo credit: See-ming Lee 李思明 SML