(via Paul Michael at WiseBread.)

 
Not only does Karney paint a great picture of the problem with overdraft fees in today’s banking system, but he also demonstrates how a little bit of push-back by you, the account holder, can make a difference.

We’ve seen this push-back at a larger scale with the class action lawsuit against Bank of America filed on behalf of many of the bank’s customers. The Consumerist describes the case and provides a link where you can claim your $78 share here (must be completed by May 1). Overdraft fees are a huge problem for us and have only gotten worse (see our FABB Snapshot: Overdrawing Accounts Rises As Economy Worsens). Consumer Union estimates consumers were charged $7.8 billion last year in overdraft fees related to debit cards and ATM withdrawals, while the FDIC reports that in 2006, 74% of service charges on deposit accounts were overdraft-related fees (pdf). Still, what we as consumers want isn’t a way to get overdraft fees reimbursed–we want a fair culture within banks that results in reasonable fees and easy-to-understand procedures.

Of course, there are two sides of this coin–the banks’ fees and the consumer’s negligence. Because we consumers as a whole haven’t paid enough attention and given properly organized criticism to these policies, these fees were introduced and became standard over time. Now we can call the practices “unfair,” but unfortunately rhetorical consonance alone need not result in literal payback. As more of us pay close attention to our finances, we begin to wonder: how do they get away with charging $38 for a latte…really? (video) Will social networking sites like Twitter help people organize to change practices by large banks? (For examples of consumer frustration, see the results of a search for “#BofA” or, even worse, a search for “#BankOfAmerica” on Twitter.)

But Not ALL banks charge terribly high overdraft fees; in fact, there are many banks that charge no fees or fees comparable to the inconvenience of the overdraft. Here’s a(n incomplete) list of banks that offer no-fee overdraft protection through a savings account or a line of credit with at least one of their accounts. We don’t intend this list to be our recommendation or stamp of approval, only the facts–if you have an account at one of these banks or are thinking of opening one, make sure you pick the right form of overdraft protection. You could save yourself hundreds of dollars and a whole lotta stress.

So who’s watching (or not watching perhaps) these institutions? Banks and credit unions that offer consumers federally-insured checking accounts are regulated by different federal agencies. Each state also has a department that watches over the banks in their state. There are 3 primary federal agencies that regulate banks and credit unions. Within these agencies their are different “offices” or “departments” that oversee and regulate different aspects of the banks’ operations (their acronyms are long). Here are the 3 main agencies:

• Federal Reserve Board “The Fed” was founded in 1913 to provide stability to our financial system. They manage our government’s monetary policy, supervise and regulate banks and provide financial services to these banks – for example, clearing checks.
• Federal Deposit Insurance Corporation The FDIC was founded by congress in 1933 to protect deposits. This was in response to thousands of bank closures in the late 1920’s and early 1930’s. This independent federal agency insures deposits and regulates banks. The FDIC can take over a bank if they’re insolvent and either sell-off it assets or run the bank.
• National Credit Union Administration In 1934, the federal government passed the Federal Credit Union Act to facilitate the chartering of federal credit unions in every state. The purpose was to make credit available to individuals and promote individual savings. These institutions are not-for-profit and are managed as cooperatives. In the 1970’s the NCUA was formed and is backed of the full faith and credit of the U.S. government (just like FDIC-insured deposit accounts).