Why did the FDIC step into the whole overdraft mess with a new rule requiring banks to essentially work with serial overdrafters, who rack up huge fees because they so often make charges with insufficient funds? After all, much-ballyhooed Fed policies and credit card reform legislation was intended to address this problem. But a strange thing happened in the wake of the "crackdown," notes Reuters. The people who were most abused by overdraft fees, the serial overdrafters, opted in to such programs in surprising numbers.

One study found that customers with 10 or more overdrafts in a year, "almost all opted in." For all consumers, consent "varied between 60 percent and 80 percent with a median of about 75 percent."

A Reuters columnist wrote: "This astonishes and depresses me no end. Most banking customers are relatively unharmed by overdraft fees; by far the greatest damage to consumers, and the greatest profits for banks, came from the poorer customers who could least afford it. Essentially, overdraft fees were a way for the banks to monetize the naiveté and imprudence of their least-sophisticated customers, and the Fed rule was meant to put an end to such predatory price-gouging."

Some now suggest the financial effects of anti-overdraft rules may be less than originally thought. But the FDIC has weighed in, as we noted, with some new guidance designed to curb programs that seem to encourage over-use by those who can least afford it. It aims to motivate "banks to offer less costly alternatives if, for example, a borrower overdraws his or her account on more than six occasions where a fee is charged in a rolling 12-month period."

For more:
- here's the column

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