After years of hoarding the power to enact consumer protection rules that would prohibit banks from gouging customers through deceptive and abusive business practices, the Federal Reserve now decides (AFTER Sen. Chris Dodd proposed a bill that would strip it of  its supervisory powers) to pass a rule that prevents banks from automatically charging customers overdraft fees for debit and ATM transactions effective July 1, 2010.  That is unless the bank gets the customer’s permission to do so ahead of time.  The new rule does not apply to checks and electronic bill payments because the Fed has decided (we assume upon counsel from the banks) that customers would want these types of transactions covered.  Hey Fed, guess what?  Banks charge these fees even though they do not actually cover  the offending transaction.  So they charge the excessive fee for the mere attempt of the transaction.  Also, consumers are not stupid.  They know that the Fed’s primary responsibility is looking out for the viability and soundness of banks.  Consumers also know that this disingenuous “act of benevolence” allegedly being done on their behalf  is really designed to keep these abusive penalty fees contributing to the bottom line of the banking industry as long as possible.  The industry makes an obscene $25 to $35 billion yearly in overdraft fees.  So Mr. Bernanke, please do not do consumers any favors.  Make the rule apply to all transactions.  Banks should be required to get the customer’s permission before covering any type of transaction involving the imposition of an overdraft fee….PERIOD!

Another thing…why wait until July 1, 2010 to make the rule effective?  The banking industry has demonstrated how it exploits its customers when given a grace period.  So why give it NINE MONTHS????  Nine months to continue fee gouging customers even more than it is doing now.  The fact that the Fed, with full knowledge of the deceptive practices currently being engaged in by the industry, are delaying the effective date of such an important protection proves that consumer protection is not the Feds priority, the profitability of the banking industry is the Feds priority. 

This is a pathetic attempt by the Federal Reserve to maintain the status quo and prevent its consumer protection arm from being usurped and put in the hands of a regulator who will ACTUALLY use it for the benefit and protection of consumers.  The growing populist anger at the banking industry is what spurred this bone being thrown at consumers but it is a mere pittance in light of the offenses being perpetrated. 

Check out Sen. Dodd’s bill in contrast:

–Require banks to get customers’ consent before enrolling them in an overdraft protection program for ATM and debit card transactions.

–Limit the number of overdraft fees banks can charge to one per month and six per year.

–Require that fees be proportional to the cost of processing the overdraft.

–Require customers be notified, by e-mail, text or traditional mail, when they overdraw their account.

–Require that customers be warned if an ATM or teller transaction will overdraw their account.