Rumblings on Capitol Hill about reining in abusive debit card overdraft practices have prompted some banks to change their ways. That's good, but their pre-emptive strike shouldn't head off new regulation. Congress still needs to increase consumer protections.
Decisions by major players Bank of America, JPMorgan Chase and Wells Fargo to reduce overdraft fees and provide more transparency will help. But the changes don't go far enough to spare consumers the sting of the fees - which average $27 per overdraft and generate $17.5 billion a year for the nation's banks. And voluntary reforms are too easy to reverse.
Congress should see to it that consumers have the opportunity to accept or reject overdraft protection plans. Currently many banks automatically enroll customers in the plans, and then slam the unwary with the fees. Some banks allow consumers to opt out of the plans, but that's not good enough. Opting in should be the rule. Congress should also ban the manipulation of the sequence in which debits and checks are paid in order to gin up more overdrafts and fees.
A bill from Rep. Carolyn Maloney (D-Manhattan) would impose such rules and require notification at the point of sale, whenever an electronic transaction would trigger an overdraft. There are technical and privacy issues with real-time notification. But the goal of reform - greater transparency and informed choice for consumers - is right on point. hN