(FinalCall.com) – Financial giant Bank of America recently announced a change in their debit card overdraft fee policy, which could greatly impact many Black and Latino account holders.

This summer they will only authorize single debit card transactions at the point of sale if a customer has enough money in their account at the time.

“Our customers have been clear that they want to know if a purchase is going to overdraw their account,” said Susan Faulkner, Deposits and Card Product executive. “Our solution is simple, clear and helps customers control their finances by reducing the possibility of over-extending themselves at the point of sale with a debit card.”


The Federal Reserve Board’s new rules that prohibit financial institutions from charging consumers fees for paying overdrafts on ATM and one-time debit card transactions, unless a consumer consents or opts in go into effect in July.

“The final overdraft rules represent an important step forward in consumer protection,” said Federal Reserve Chairman Ben S. Bernanke. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”

According to the Center for Responsible Lending (CRL), overdraft loans cost consumers nearly $24 billion each year. The most common triggers of overdraft fees are debit card transactions that could easily be denied for no fee; in fact, until recent years, they most often were.

Today, banks and credit unions routinely approve debit card overdrafts with no warning, charging a fee averaging $34 for an overdraft averaging only $17. They also often manipulate the order in which they post transactions, which further maximizes fees.

All too often, unreasonable and abusive overdraft fees unnecessarily force low-income families into a cycle of snowballing fees that eat up a large portion of their paychecks.

“The Center for Responsible Lending commends Bank of America for its decision to stop charging overdraft fees on debit card purchases. With this change, Bank of America–which issues more debit cards than any other bank–joins another banking giant, Citibank, in practicing responsible debit card overdraft policies,” said President Michael Calhoun.

“Bank of America’s decision will allow millions more Americans to use their debit cards without fear of being driven into high-cost debt. As the largest debit card issuer, Bank of America stands to lose the most in overdraft fees by stopping this unfair practice. Other banks should promptly follow suit.”

The FDIC’s 2008 survey on overdraft fees found lower income communities bear the brunt of fees. The lower their income, the more likely they were to pay recurrent overdraft charges. Ninety-three percent of all fees were paid by customers with five or more fees per year.

Some lower income consumers pay 20 or more overdraft charges in a one-year period, amounting to over $1,600 in fees. Accounts held by customers in low-income areas (in some areas, with median annual income of less than $30,000) were more likely than accounts in higher-income areas to incur overdraft charges.

This was not news. Lower income and communities of color have long been hit hard by overdraft fees. Consumer Federation of America’s 2004 survey found that 45 percent of Blacks had experienced overdrafts, compared to only 28 percent of consumers overall.

In 2006 and 2008, CRL found that only 16 percent of people who overdraft pay 71 percent of all overdraft fees, and those individuals are more likely than the general population to be lower income and non-White.

CRL believes the Federal Reserve should also limit the amount and number of these fees.

“Despite knowing for years of the problems these fees cause, the Fed recently issued a rule requiring only that banks get customers to sign a consent form authorizing the institution to charge unlimited fees on debit card transactions. Many banks are already engaged in scare campaigns to get customers to sign these forms,” said Mr. Calhoun.