Consumer Lending

Study: Consumers still lack understanding of overdraft fees

OverdraftA study from The Pew Charitable Trusts recently showed many consumers still lack an understanding of overdraft fees, and, though the number has declined since 2012, many would rather see a transaction declined than pay an overdraft fee.

Last year, bank customers reported paying total overdraft fees averaging $69—the median amount reported was $35, and one-fourth said they paid overdraft fees of $90 or more.

The study showed 52 percent of consumers who paid overdraft fees do not remember opting into coverage and were still charged a fee. Half of consumers who paid overdraft fees said overdraft penalty products hurt consumers more than they help.

A large majority—80 percent—said overdraft practices and fees should be more regulated, and approximately two-thirds said they would rather have a transaction declined than pay an overdraft fee.

Pew echoed recommendations made last year by the CFPB that require financial institutions to enhance overdraft disclosures to make them more transparent and more easily explain the fees. It also urged the CFPB to implement a ban on transaction reordering and require fees to be reasonable and based upon the real cost of providing service.

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