Elizabeth Warren, a Harvard professor who has written extensively on "tricks and traps" in financial-services products, said the automatic overdraft plans were "about exploiting consumer weakness."
"Many of us do not keep our checking accounts balanced to the penny every time. Many of us do not account for the number of days that the bank will keep a hold on a deposit. We can make a 50 cent mistake and be charged $30 for it."
Logan Scott, a data security worker in Cleveland, said he was hit by four overdraft fees in one day. Thinking he had $11 in his account, he bought several small items, including $4 in sodas from a convenience store. That triggered a total of $140 in fees, he said.
When he complained to the bank, he said his banker told him to keep better track of his money.
The Center for Responsible Lending's study said fees can be triggered by the order in which banks choose to clear checks and other charges to customers' accounts. By clearing larger transactions first, a bank can push an account into the red faster than if it first cleared smaller transactions, the study said.
It said banks "reserve the right to [clear] in the order they choose, and not necessarily in the order in which payments are made."
Maloney said her bill would require banks to warn consumers at a point of purchase that a debit card transaction would trigger an overdraft fee, much as they warn a consumer who is about to be charged to use an automated teller machine. That would allow a consumer to cancel the purchase and avoid a fee.
But Nessa Feddis, senior federal counsel for the American Bankers Assn., said that warning customers when a debit transaction would trigger an overdraft would be "cost-prohibitive" for banks.
There are ways to set up your accounts to reduce fees, bankers said. Consumers can specifically sign up for an overdraft protection service that automatically advances funds from a linked savings account, credit card or other line of credit when a customer has insufficient funds. The fee for this service can be as low as $10 per money transfer.
By contrast, Bank of America would normally charge $20 per overdraft on the first day and $35 per item each additional day the overdraft isn't covered by added funds, said Diana Wagner, a spokeswoman.
At Wells Fargo & Co., customers also have the option of enrolling in the bank's overdraft protection service, which offers significantly lower fees for overdraft transactions.
Without linking to another account, a Wells Fargo customer in California with insufficient funds in his or her checking account would be charged $23 per item on the first occasion and $34 per item each time thereafter, based on the number of overdrafts in the preceding 12-month period, said spokeswoman Mary Trigg.
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kathy.kristof@latimes.com
andrea.chang@latimes.com
