Regulation E Amended – Opt out of Your Bank’s Overdraft Scheme

I got an email this morning from one of my banks (Bank Atlantic), asking me to befriend it on Facebook. While I don’t have Facebook, I can assure you that I am not friendly towards banks.This started to bother me… Why would Bank Atlantic want to be my friend? How does a bank have any friends at all? What would Bank Atlantic say if it knew that I did most of my banking at Bank of America?

All of these questions deserve no merit because what has happened is that institutions (for example banks) have begun attempting to recapture that nostalgic image of ye old neighborhood bank. This is the sort of image where the tellers know you by name, and they know you because they did banking with your dad- he is still a customer. This is manipulation.

Unfortunately times are not like that anymore, and under this phony veil of close-knit-intimate-banking is nothing more than a force that is really trying to take advantage of people who have been taken advantage of too much. Neighborhood banks have died out in part because they cannot compete with global banks that have dominated electronic banking. There is no such thing as a “banker” anymore, and behind the counters are automatons. Take a deposit, give money- transfer funds. Limited discretion. Your friendly banker has been replaced with some schmuck in a suit, who probably just made it beyond 9th grade algebra. He knows how to read reports, therefore he is the man for the job- he is otherwise known as the “branch manager.”

On the phone are “representatives” who can read computer screens and scripts. Banking is no longer personal.

Policy, Policy, Policy. That is the dogma of the bank. “No ma’am, I cannot waive your overdraft fee- that is the policy of the bank.” “But ma’am, I’m not going to tell you again- you agreed to this when you signed up…” [Insert unsophisticated account holder next to institionalized bank's intimidation tactic here]

This is the sort of bewildering story I was told by a friend of mine who insists that she is always right. This time I have to give her credit because she was right (we’ll kinda).

“Banks are out to get you (the consumer)” she explained to me. “Take overdraft fees for example: If you have a certain amount of funds in your bank account and there are four charges that are about to ‘hit,’ the bank will take the one charge which will cause your account to overdraw and then apply the rest of the charges in order to assess multiple overdraft fees.”

For example:

If you have $100 and there are subsequent charges which are going to “hit”- $34.00, $59.00, and $100.01- the bank will first apply the charge for $100.01- which causes your account to go into the negative by .01 (overdraft fee number 1). Then the bank will apply the $34.00 and $59.00 charges (overdraft fee number 2, and 3). This is deceptive because the bank is now getting three overdraft fees and could have avoided two of them by applying the lesser amounts to the initial positive balance in the bank account (which would have left a nominal surplus), and then applying the largest charge to overdraft the account only once.

“Its not right!” she exclaimed. “I heard from a former banking executive that I could opt-out of the overdraft program.” “This would just cause my card to be declined in POS purchases if there are insufficient funds. “But, [REDACTED], some people might find it attractive not to be declined in a point of sale transaction and would rather pay the $35.00 fee later.” I said. Furthermore I added, “they might think that a $35.00 fee is worth not being publicly embarrassed.” “Yea, but most people don’t even know they have the option to opt-out” she explained.

So, I did my research and while Regulation E (the guidelines for electronic banking) was amended to allow consumers to opt out of bank overdraft provisions, they do not take effect until July and August of 2010.


And See:

Despite all of this, the best way to avoid overdrafts is to keep track of your account. Certainly it is not the banks fault for the consumer’s irresponsible spending, but there is a sense of culpability when the bank is taking money (unnecessarily) from the pockets of people who can’t afford it otherwise

Have you been harmed or wronged by a business? Do you feel mislead? Deceived, perhaps? Call Friedman Legal today for a free consolation at 888-411-1677