Regulators Still Find Problems in Overdraft Fees

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Richard Cordray, the director of the Consumer Financial Protection Bureau.Credit Jonathan Ernst/Reuters

Four years after federal regulators passed new rules aimed at curbing overdraft fees, the Consumer Financial Protection Bureau is still finding problems with the high fees that banks charge customers when they overdraw their accounts.

In a new report released on Thursday, the agency said overdraft fees continue to pile up for many bank customers, particularly among young people.

The study found that the majority of debit card overdraft fees — which average about $34 each — involve transactions of $24 or less and are paid back within three days.

“If a consumer were to get a loan on those terms, that would equate to an annual percentage rate of over 17,000 percent,’’ the agency’s director, Richard Cordray said in a call with reporters on Thursday afternoon.

For years, regulators and consumer advocates have worried that overdraft fees amounted to an expensive form of debt that was disproportionately hurting lower income people with little or no financial cushion.

Many bank customers who have accumulated hundreds, even thousands, of dollars of overdraft charges have dropped out of the banking system entirely because they can’t afford the fees.

In 2010, federal regulators began requiring banks to obtain a customer’s consent before charging them fees for allowing overdrafts on A.T.M. and debit card purchases.

Other banks have voluntarily ended some overdraft practices, including Bank of America, which stopped charging for overdrafts on debit card purchases and instead simply denies the purchase if the customers lack sufficient funds in their accounts. Some banks have also put voluntary limits on the number of overdrafts they can charge in one day.

Previous studies by the consumer protection agency have shown that as many as 40 percent of new customers at some banks opted for overdrafts. Agency official said on Thursday they were now studying what bank customers are being told when they “opt in” for overdraft fees and whether they are making an informed decision.

According to the study, which examined a “significant portion” of checking accounts in the United States, 18 percent of accounts where customers opted in incurred overdrafts more than 10 times a year.

Bureau officials stopped short of saying whether they were planning to propose new rules on overdrafts, which continue to provide a substantial source of income to banks. Mr. Cordray also noted that the banks should be allowed to charge for overdrafts.

“But we need to determine whether current overdraft practices are causing the kind of consumer harm that the federal consumer protection laws are designed to prevent,” he said.