Consumer groups concerned about debit card overdraft regulations they expect three federal agencies to enact this summer are pleaing for an opt-in approach regarding bank overdraft programs. The public comment period on the proposed rules ends Monday. "We feel the opt-in [option] is the necessary approach that will really protect the consumers from these high-cost [fees], Lauren Zeichner Browne, staff attorney for Yonkers, N.Y.-based Consumers Union, tells ATM&Debit News, a CardLine sister publication. The company publishes Consumer Reports magazine. A national poll Consumer Reports National Research conducted Feb. 5 to 8 found that most consumers do not understand how an overdraft program works, Consumers Union says. The survey found that 39% of respondents believe their bank either would deny a debit transaction or allow it to proceed without charging a fee if it would overdraw their account. Almost half of the respondents (48%) believe their ATM card would not work if they attempted to withdraw more money than was available in their account. The survey also found that 66% of consumers "prefer to expressly authorize overdraft coverage." The research center surveyed by phone 679 adults who reported having a checking account with an ATM or debit card. Consumers Union included the results of the survey with a letter to the Federal Reserve Board, one of the federal agencies that proposed the regulations last May. The Office of Thrift Supervision, which regulates state and federally chartered savings-and-loan banks, and the National Credit Union Administration, which oversees most federal and state-chartered credit unions, also helped develop the proposed regulations. Consumers Union urged the board to recognize that fee-based overdraft loans are extensions of credit that should be subject to the Truth in Lending Act, a federal law Congress passed in 1968 to protect credit cardholders by requiring issuers to provide clear and full disclosure of their lending agreements and associated costs. In May, the federal agencies proposed two rules. One would enable bank customers to opt out of automatic programs in which banks charge high fees to checking-account holders who overdraw their accounts. Another proposal would prohibit "banks from imposing a fee when the account is overdrawn solely because a hold was placed on the funds in the consumer's deposit account." Banks place holds on account funds as transaction go through the settlement process.

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