Overdraft Fees, Consumer Debt, and Bankruptcy

Do overdraft fees ever add up to such an extent that consumers have to consider filing for personal bankruptcy? According to a recent article in The Washington Post, “the country’s largest banks have increased the amount they collect from consumers in overdraft fees . . . just as regulators are considering whether to issue rules that would rein in their use.” Are overdraft fees and related charges really such a big problem? How much do overdraft fees actually cost consumers? To better understand the harm that overdraft fees can cause, it is important to look at some of the recent research reported by the Consumer Financial Protection Bureau (CFPB) in the article in The Washington Post.
Increase in Overdraft Fees Collected by Banks
Do banks often unfairly charge consumers overdraft fees? According to the article, the CFPB has been looking into “how banks levy overdraft fees on customers who bounce checks or withdraw more than they have in their accounts using debit cards or automated teller machines.” What did the government agency find? The director of the CFPB, Richard Cordray, emphasized that these overdraft fees “have become a significant source of industry revenues,” and in some cases, they can even lead a consumer to file for Chapter 7 bankruptcy.
In recent years, many of the banks in the United States have upped their overdraft fees. For example, Wells Fargo overdraft fees rose by 16% from last year. While overdraft fees did not rise by as much for Bank of America and JPMorgan Chase, those banks nonetheless increased overdraft fees by 6% from the same time last year.
In total, if we look at “the amount collected by the more than 600 banks included in the Federal Deposit Insurance Corporation,” we see that the revenue collected from overdraft fees rose to $2.7 billion (which represents an overall rise of 6%). During the first quarter, Bank of America collected a total of $393 million in overdraft fees.
Consumer Financial Protection Bureau Targets Overdraft Fees
Is it fair for these banks to charge customers high sums when they bounce a check or overdraw a checking account through an ATM withdrawal? The CFPB plans to issue possible rules to curb overdraft fees and the manner in which they are levied.
As the article clarifies, this is not the first time that the CFPB has targeted overdraft fees being charged by banks. Back in 2010, “regulators forced banks to get consent before charging customers for ATM and debit card transactions that exceed their accounts.” Why are federal regulators and consumer advocates so concerned about the costs of overdraft fees? A 2015 report from Pew Charitable Trusts showed that overdraft fees are costing Americans a lot of money. For the average consumer who overdrafts an account “at least three times a year,” the cost in fees totals “nearly a full week’s worth of annual household income.”
For some of these bank customers, the overdraft fees—many of which result from automatic bill withdrawals—end up costing thousands of dollars in the long run. For example, one customer surveyed in the article ended up with more than $1,400 in debt from overdraft fees after only two months of financial difficulty.
If you are having difficulty making payments on your bills or have concerns about your mounting debt, an experienced Oak Park bankruptcy lawyer can discuss your options with you. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:
Student Loan Debt Mistakes to Avoid

Comments

Post a Comment

Popular posts from this blog

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti
Read more

Learning About Different Types of Wills

Whether you are young or old, single or married, wealthy or with limited financial means, healthy or dealing with a medical condition, it is important to make a will. Many people have incorrectly heard that wills are only necessary for particular people, such as those with a substantial amount of assets or for older adults in poor health. Yet wills are critical for adults of all ages, and an experienced Oak Park estate planning lawyer can help you to make one. Before you begin working with a lawyer on a will, you might start conducting your own research into wills in Illinois and the requirements for a valid will. In so doing, you are likely to come across information about many different types of wills, and you are probably going to wonder whether you will need more than one kind of will. In short, there are different terms that can be used to describe the form or function of a will, as well as some distinct types of wills. Our Oak Park estate planning attorneys can explain in more
Read more

Younger Parents Need an Estate Plan

It is critical for younger parents to have an estate plan, even if they know they are healthy and do not anticipate that anything will happen in the near future. Much too often, younger parents assume that they can wait until they are older to consider estate planning or until there is a health-related reason to begin the estate planning process. Yet estate planning is critically important for parents who have minor children. While estate planning is important for adults of all ages, it can allow parents to make important decisions about who will care for their children in the event that they become unable to do so themselves. Our Oak Park estate planning lawyers can explain in more detail. Naming a Guardian for Your Minor Children in Your Will Most importantly for younger parents, making a will allows you to name a guardian who can care for your child in the event of your unexpected death. Nobody anticipates a deadly accident or a sudden situation in which there is a need for another
Read more