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CFA Study: Big Banks' Overdraft Fees UpAfter two stable years, fees charged by the 14 largest U.S. banks when customers overdraw their bank accounts are starting to inch upward, says new research from the Consumer Federation of America (CFA), Washington. The survey, reported in News Now from the Credit Union National Association, comes as credit unions continue their membership growth spurt into 2012 after record growth in fourth quarter 2011. Much of that growth stems from consumer dissatisfaction with higher fees charged by big banks. That frustration culminated in the Nov. 5, 2011, Bank Transfer Day movement and nationwide visibility for credit unions touting their lower fees and better rates, cooperative structure, and service philosophy. Since the rebellion, consumers have been warned repeatedly that banks will start trolling for new ways to raise fee revenues. As for the overdraft fees, "The two-year period of flat fees coincided with the implementation of a new Federal Reserve Board requirement that banks get affirmative permission from consumers to incur overdraft fees on debit card and ATM overdrafts," CFA reports in a press release. "While the typical overdraft fee remains at $35 per transaction, two of the largest banks—U.S. Bank and Fifth Third Bank—have announced changes to their tiered-fee structures that indicate rates are again on the rise," the organization says. Consumers like credit unions for their lower fees and better rates, cooperative structure, and service philosophy.
"Big bank overdraft fees for a single transaction are very high, ranging from $33 to $37 at the largest banks," says Jean Ann Fox, CFA director of financial services. "Consumers can be charged $370 in one day, according to the maximum fee and daily limit fee policies that banks have." Of the 14 banks surveyed, five—Fifth Third, PNC, RBS Citizens, SunTrust, and U.S. Bank—charge tiered fees that vary depending on how many overdrafts consumers incur in a 12-month period, according to CFA. Fifth Third Bank will charge $37 for each overdraft after assessing a $25 fee for an initial overdraft. It used to charge $33 for the second, third, and fourth overdrafts in 12 months. U.S. Bank will charge $15 for an overdraft transaction that is $15 or less, and $35 for any overdraft that's more than $15. It used to charge $10 if the overdraft was $20 or less, and $33 for each item more than $20. Nearly two-thirds of those surveyed pile on second or per-day fees if customers do not pay the overdrafts immediately, CFA finds. SunTrust charges $36 on the seventh day an overdraft remains unpaid, while RBS Citizens charges $6.99 a day on the fourth through 13th day the overdraft is owed. Fifth Third is dropping its sustained overdraft fee that adds $8 a day after the overdraft remains unpaid for three days. Banks are trolling for ways to raise fee revenues.
The survey found the biggest changes relate to the order in which banks process payments from accounts. As recently as 2010, almost all major banks paid transactions from largest to smallest received, or reserved the right to do so—a practice that can result in consumers with low balances overdrawing their accounts and paying even more overdraft fees, CFA reports. Since 2010, CFA found that some banks have changed their processing order policies, paying time-stamped transactions in the order received, before processing checks and other transactions from largest to smallest. Eleven of the banks surveyed still pay some transactions from largest to smallest. "Bank overdraft loans are a form of payday lending," Fox says. "Banks are charging staggeringly high rates for short-term borrowing when fees are computed the same way payday loans are calculated." 
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