Overdraft Fees: The Dough Keeps Rolling In

Banks have spent much of the past year howling about revenue lost after financial reforms limited consumer fees, especially the billions they reaped from charges for covering overdrafts on debit cards. Those programs, though, remain highly profitable. While fee revenue will be down about 16 percent this year from its peak in 2009, it will top $16 billion, predicts Moebs Services, a banking consultancy. “Consumers are still getting hit really hard by overdraft fees,” says Rebecca Borné, an attorney at the Center for Responsible Lending, a consumer advocacy group.

As banks pushed a shift from paper checks to debit cards over the past decade, they began enrolling customers automatically in overdraft protection plans, with charges of as much as $35 for each overdrawn transaction. Banks say that lets the 185 million Americans with debit cards make emergency purchases even if their account is short. Consumers, though, soon discovered that a slice of pizza could cost almost $40 after overdraft fees. Last year the Federal Reserve barred banks from offering overdraft protection on debit-card transactions without prior consent from consumers.