Thursday, July 31, 2014

Report criticizes BofA, others on overdrafts

Bank of America, BB&T and Wells Fargo are among lenders named in a report Thursday that claims to have uncovered deficiencies in how information on overdraft protection is provided to consumers.

The report is based on mystery shopping of the largest banks by deposits in four cities: Chicago, Durham, New York and Oakland, Calif. Four organizations, including Durham-based Reinvestment Partners, released the findings of the investigation conducted in March and April.

In all four cities, the report said, the mystery visits to branches found that banks' explanations of overdraft programs were "highly inconsistent" and often unclear and incorrect. The report also said bank employees frequently did not explain that consumers must consent to being charged for automated teller machine and debit card overdrafts.

The report's findings come as federal regulators are becoming increasingly concerned about overdraft fees and their impacts on consumers.

In a separate report Thursday, the Consumer Financial Protection Bureau said small debit card purchases are leading to expensive overdraft fees four years after federal regulators began requiring banks to get consumers' permission for the coverage.

The bureau said most debit card overdraft fees stem from transactions of $24 or less and are repaid within three days.

A person who overdrew a checking account by $24 and paid it back three days later would essentially be paying an annual percentage rate of 17,000 percent based on a median overdraft fee of $34, the bureau said.

Bank of America did not immediately provide comment on the mystery shopping report. In 2010, the Charlotte bank decided to decline debit card purchases if the account will be overdrawn.

Wells Fargo also did not immediately provide comment. The San Francisco bank does not charge overdraft fees if an account is overdrawn by $5 or less.

BB&T spokesman David White said in an email that BB&T could not comment without having seen the report's findings. The Winston-Salem lender has "a very comprehensive account opening process to ensure our clients fully understand the nature of all fees applicable to their account," White wrote.

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