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The U.S. Federal Reserve Thursday banned overdraft fees on automated-teller-machine and debit-card transactions unless consumers have actively selected an overdraft protection service.
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Overdrawing accounts using debit cards may get less costly. |
The rules go into effect July 1.
"The final overdraft rules represent an important step forward in consumer protection," Federal Reserve Chairman Ben Bernanke said in a statement.
The rules do not cover fees for overdrawn checks, Fed officials told reporters. The Fed — the U.S. central bank — found that consumers were willing to pay fees to ensure that any overdrawn checks are paid, the officials said.
Nor do the rules bar fees on transactions from recurring debit-card transactions, such as ones consumers set up to make regular payments, the officials added.
Overdraft fees charged by banks total some $25 billion to $38 billion a year, officials said.
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.
Senate Banking Committee Chairman Christopher Dodd has introduced legislation limiting bank overdraft fees, and Representative Carolyn Maloney has introduced a similar bill in the House.
The Fed, which has stepped up consumer protection efforts, in September proposed credit card rules that would shield customers from costly fees. It has also said it would investigate consumer complaints against financial companies that are not banks, and barred mortgage brokers from earning more when they sell high-cost loans.
Dodd has proposed stripping the Fed of its authority to regulate banks, calling the institution's performance as a regulator an "abysmal failure."
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