Debit Card Predators

The Federal Reserve took a wholly inadequate step last year when it required banks to get people to opt in to the overdraft plan before charging them fees, according to a New York Times editorial today. The banks almost never explain how the system works or what it will cost according to the editorial, and as a result, low-income debit card holders are still being exposed to predations from which credit card holders are protected. New FDIC rules require banks to clearly explain overdraft costs. Most important, if a customer is charged a fee for overdrawing his account more than 6 times in a 12-month period, the bank must offer a less costly alternative. The editorial advocates for the Federal Reserve to adopt the FDIC?s rules, but if it does not, the Bureau of Consumer Protection should make fixing the debit card rules a top priority when it starts work in six months.
http://www.nytimes.com/2011/01/21/opinion/21fri2.html


In related news, Rep. Barney Frank (D-Mass.), one of the authors of the financial regulatory overhaul, said that he is ready to work with the Republican majority to force changes in a Federal Reserve proposal to cap debit-card ?swipe? fees, Bloomberg News reported yesterday. The Fed?s proposed limits on so-called interchange fees may reduce annual revenue for U.S. banks by more than $12 billion. Visa Inc. and MasterCard Inc., which set the fees and pass the money to card-issuing banks, tumbled more than 10 percent after the proposed rules were made public on Dec. 16, based on investor concern that the caps will damage their business model. Read more.


http://www.bloomberg.com/news/print/2011-01-20/debit-card-swipe-fees-changes-supported-by-u-s-house-s-barney-frank.html