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Overdraft fees piling up for consumers

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For debit card holders, the burden of paying overdraft fees has risen 35% over the last two years, reaching $24 billion nationwide last year, a new report from consumer advocates says.

The fees, collected mostly on small ATM transactions, produce big profits for banks and credit unions but create a financial burden for approximately 51 million Americans, who overdraw their bank accounts each year, says the Durham, N.C.-based Center for Responsible Lending.

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‘Banks and credit unions have become so sophisticated in driving up overdrafts that Americans now pay more in overdraft fees every year than they do for books, cereal or fresh vegetables,’ says Leslie Parrish, a senior researcher at the center. ‘These billions of dollars drained from consumers each year represent lost opportunities for families to save for a rainy day or buy necessary goods and services that could help spark the economy.’

Most overdraft fees could be avoided if financial institutions deny payments when no funds are available in a cardholder’s account, the report suggests. Limited fees could be charged if the bank provides a real-time warning that a fee would be charged for an overdraft and customers are given a choice to accept or decline the money.

‘We’ve seen these fees do nothing but go up,’ said Ginna Green, a center spokeswoman in Oakland. ‘For us, this underscores the need for a [federal] consumer financial protection agency that looks out for consumers and has their best interests at heart.’

-- Marc Lifsher

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