A new study released by the Center for Responsible Lending (CRL) revealed that many bank customers feel misled by what they were told their overdraft protection program actually covers. Others admitted they did not want to sign up for their programs but felt pressured to do so due to aggressive marketing by the banks.
Overdraft Protection Not What It Seemed for Many Customers
As determined by a Federal Reserve ruling last year, banks cannot sign customers up for overdraft protection (which helps customers avoid a negative balance in their checking accounts when using their debit card) without having the customers sign up on their own since it very often comes with fee that could average as much as $34, even if the overdraft amount is less.
But many customers who responded to the CRL survey complained that while they did they sign up, it wasn’t because of the benefits they thought they’d receive.
The survey found that many account holders were approached with aggressive marketing tactics by their banks. As a result, 33 percent opted into the program to stop receiving requests to sign up by phone, e-mail or through the mail.
Customers Don’t Understand the Protections
Others surveyed by CLR revealed that banks convinced them to sign up for protection without giving them appropriate insight into what the program entailed:
- 60 percent opted in to avoid a fee if their debit card was declined, even though it is being declined with protection that results in fees.
- 64 percent wanted to avoid bouncing paper checks, although overdraft protection does not cover paper checks bouncing.
According to these two responses, it’s apparent that customers were confused about the ins and outs of the overdraft protection program. Unfortunately, this confusion is comes at a cost.
A recent Pew Center study, titled “Hidden Risks: The Case for Safe and Transparent Checking Accounts,” found that overdraft charges will cost Americans $38.5 billion this year, which represents $18.6 billion increase over the past decade.
For many, this news may be enough for them to contact their bank and ask to opt out of a program they thought was created to protect them.
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