NTKG, Reporting

The Federal Reserve today announced new rules that will ban banks from charging overdraft fees on debit card and ATM transactions unless a consumer opts in to an overdraft program.

“The final overdraft rules represent an important step forward in consumer protection,” Fed Chairman Ben Bernanke said in a statement. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”

Overdraft fees can result in consumers being charged up to $35 for withdrawing more money than they have in their accounts. Under the Fed’s rules, all consumers — including existing account-holders — would have the choice to sign up for overdraft services.

If customers choose to opt out of the overdraft programs, purchases for dollar amounts greater than their account balances will be denied.

The rules do not apply to overdrafts incurred by checks. The Fed conducted testing that showed that most consumers want coverage for checks but do not want to be enrolled in overdraft programs for debit card and ATM transactions.

The new rules will take effect on July 1.

The Fed’s actions come as the central bank fights to maintain its consumer protection responsibilities.

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