Bank overdraft fees creeping up again, consumer monitors say

Even as the new Consumer Financial Protection Bureau weighs whether to address bank overdraft fees that cost U.S. consumers nearly $30 billion last year, some of those fees continue to inch up, according to new reports by the Pew Charitable Trusts and the Consumer Federation of America.

The typical overdraft fee at the nation's largest banks has remained about $35 for the last two years, the reports said. But Pew's Safe Checking Project said Thursday that median fees for an extended overdraft — one not quickly covered by new deposits — rose 32 percent from October 2010 to October 2011. And Pew said more accounts were subject to the extended-overdraft fees, which consumer advocates say blur the line between overdrafts and short-term, high-cost "payday loans."

The Consumer Federation of America said Thursday that at least two banks, U.S. Bank and Fifth Third Bank, plan to raise overdraft fees later this month. U.S. Bank will charge $35 for any overdraft of more than $15, up from a fee of $33 for overdrafts over $20

Jean Ann Fox, director of financial services for the consumer group, said the increases were among the first the group had noted since 2010, when the Federal Reserve required banks to give customers a choice for how they treat debit-card purchases or ATM withdrawals that would push their accounts into the red. Unless the account-holder has agreed ahead of time, the bank cannot charge overdraft fees for transactions that could instead be declined.

Despite the relatively stable fees, the Consumer Federation continued to criticize extended-overdraft fees and other practices it says can turn a simple miscalculation into a costly mistake.

"Consumers can be charged up to $370 in one day" under the fee rules set by the nation's 14 largest banks, Fox said. "We certainly haven't seen fees drop, and now we're starting to see some fees rise."

Pew, which has urged banks to simplify disclosure of fees and lower-cost alternatives to overdrafts, said some banks' policies continue to "put consumers at financial risk and potentially expose them to high and unexpected costs for little benefit."

Officials at the American Bankers Association disputed the assertion by Pew and Fox that consumers face unexpected or unreasonable costs now that opting in is required.

"They can't accept that this is a product that people want," said association spokeswoman Carol Kaplan. "There's a need for it, and people are willing to pay for this service."

The association reported in 2010 that about half of checking-account customers were opting in to overdraft programs, even after disclosures describing lower-cost alternatives, such as covering overdrafts from a savings account or a line of credit.

"We've heard anything between 30 and 70 percent," said senior counsel Nessa Feddis.

As it has before, the Consumer Federation reported the cost at each bank of a $100 overdraft repaid two weeks later as if it were a short-term loan. It said the best deal, at Citibank, was equivalent to a loan with an annual percentage rate of 884 percent. Some banks, including PNC and RBS Citizens, charge more than 2,000 percent.

Fox called such fees "staggeringly high." She said the new report should be "a reminder to consumers that they don't have to pay fees for debit-card purchases and ATM withdrawals. And if the bank talked them into opting in, they can opt back out."