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$29.5 Billion in Overdraft Fees? How the Big Banks Are Still Screwing Us

Millions of Americans continue to be screwed by the banks they helped bail out just a few short years ago. It just isn't right.

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Another thing: the banks examined in the Pew report have continued to reserve the right to process withdrawals by dollar amount, rather than chronologically. This practice “maximizes the number of times an account goes negative, thus increasing overdraft fees” – and the banks can choose to reorder transactions whenever they want, without telling their customers.

To make matters worse, bank customers on the whole remain terribly confused about their options, in terms of overdraft “protection” and other fees and services. The report found that the median bank disclosure form is still 69 pages long – shorter than the median form a few years ago, but still much too long. (Have you ever bothered to slog through the dozens of pages of disclosures from your bank? Of course not.) As Pew’s Susan Weinstock put it, “Consumers are expected to wade through long, confusing documents and may be subject to steep, unexpected fees to access their own checking accounts, the cornerstone of household financial management. Consumers must have understandable, transparent information that enables them to make educated choices when comparing one checking account’s costs and benefits to another.”

That’s how banks got away with charging Americans a staggering $29.5 billion in overdraft fees in 2011, according to financial research firm Moebs Services.

As you’d expect, some banks appear to be better than others about hidden fees. The Web site 24/7 Wall St. conducted its own analysis and found that the worst hidden-fee offenders are HSBC, Capital One and North Carolina-based Bank Branching and Trust, while Bank of America, JPMorgan Chase and U.S. Bank were more transparent.

As for a solution to these problems, the Pew report has several recommendations for Congress and the new Consumer Financial Protection Bureau: requiring concise, easy-to-read account terms, “reasonable” overdraft fees and better disclosure of overdraft options, for instance.

“An efficient market requires informed consumers who can make choices based on the product that best meets their needs. This is particularly important for an item as fundamental and significant as a checking account,” the report concludes. Indeed, nine out of 10 Americans is a checking account customer. And yet those millions of Americans continue to be screwed by the banks they helped bail out just a few short years ago. That just isn’t right.

Lauren Kelley is the activism and gender editor at AlterNet and a freelance journalist based in New York City. Her work has appeared in Salon, Time Out New York, the L Magazine, and other publications. Follow her on Twitter.

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