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Overdraft Protection Programs

An overdraft protection program is a financial service offered by U.S. banks that protects consumers in the event that the amount of a withdrawal from their checking account exceeds the amount of funds that exist in that account. When such instances occur, either due to an ATM withdrawal, a debit card purchase, an electronic transfer or a check, the bank issues the requested withdrawal rather than returning it unpaid or allowing it to "bounce." This does not come without a fee.

Last year, banks in the U.S. are estimated to have collective more than $38.5 billion in overdraft fees, a figure that is almost double the amount collected in 2000.

The Overdraft Protection Act of 2009

First introduced in Congress in October 2009, the Overdraft Protection Act of 2009 (H.R. 3904) is still in the initial stages of being reviewed (prior to being presented, voted on and signed into law). The act intends to protect consumers from deceptive practices regarding overdraft fees.

The Act specifically states that banking institutions are required to:

  • Clearly disclose the terms and conditions regarding overdraft protection programs and their related fees
  • Promptly notify consumers via phone, email, letter, etc. when an overdraft fee is being charged
  • Provide consumers with periodic statements regarding their overdraft program history
  • Set a limit on the amount of overdraft fees
  • Stop charging an "insufficient fund" fee for transactions at ATMs or other debit card transactions
  • Stop reporting negative information regarding a consumer's overdraft program history to third parties, such as consumer reporting agencies, if the consumer has complied with the terms of repaying all fees

Financial Compensation May Be Available

Millions of consumers have been affected by overdraft charges. In fact, these fees add up quick and can dig a deep hole for people who are already having financial problems. If you've been a victim of costly overdraft charges and you would like to speak with an attorney to find out if you qualify to seek financial compensation, contact a consumer fraud lawyer today.