NEW YORK — Of all the bank fees that customers love to hate, overdraft charges on checking accounts have to be near the top. The government’s new consumer protection agency appears to agree.
The Consumer Financial Protection Bureau said Wednesday that it will investigate overdraft fees, including how they are marketed and explained to customers. The agency said the probe could result in additional rules, perhaps even lawsuits.
Overdraft fees are charged by banks when customers try to spend more money than they have in an account. Banks will allow the transaction, then charge the customer a penalty of as much as $35.
“We’ve heard many stories about the $40 cup of coffee,” the agency’s director, Richard Cordray, told reporters and representatives from banks and consumer groups.
Cordray and representatives from four consumer advocacy groups said that the overdraft fees hurt the people who can least afford them because poorer customers are more likely to drain their checking accounts to close to zero.
Since the 2008 financial crisis, the government has clamped down on bank practices that it considers unfair, such as marketing credit cards to teenagers. Banks have complained some of the government’s moves have been too intrusive.
In 2010, the Federal Reserve barred banks from automatically enrolling customers in so-called overdraft protection programs for debit card or ATM transactions. Without overdraft protection, a transaction is declined if the customer can’t cover it.
The rule did not apply to checks, online bill payments or recurring debits, such as having the monthly cable bill automatically sent to your debit card. It also did not limit how much banks can charge for the service.
Banks have responded by marketing overdraft protection aggressively. Some told customers that opting out of overdraft protection could prevent them from making everyday transactions, including “medical or health emergencies,” according to research published last year by the Center for Responsible Lending, a consumer group that opposes overdraft fees.
Banks collected $29.5 billion in revenue from overdraft fees in 2011, according to research firm Moebs Services. That was down from $33.1 billion in 2010 but a significant increase from $18 billion in 1999, when the fees were less common.
States may tap mortgage money to fill budget gaps
JEFFERSON CITY, Mo. — The ink wasn’t even dry on a settlement with the nation’s top mortgage lenders when Missouri Gov. Jay Nixon laid claim to a chunk of the money to avert a huge budget cut for public colleges and universities.
He’s not the only politician eyeing the cash for purposes that have nothing to do with foreclosure. Like a pot of gold in a barren field, the $25 billion deal offers a tempting and timely source of funding for state governments with multimillion-dollar budget gaps.
Although most of the money goes directly to homeowners affected by the mortgage crisis, the settlement announced this month by attorneys general in 49 states includes nearly $2.7 billion for state governments to spend as they wish.
Some are pledging to use it as relief for struggling homeowners or to help related initiatives such as a Michigan plan to assist children left homeless by foreclosures. But several states are already planning to divert at least some of the money to prop up their budgets, and more will be wrestling with those decisions in the coming weeks.
Goldline agrees to refund up to $4.5 million to former customers
LOS ANGELES — Santa Monica, Calif., precious metals dealer Goldline International Inc., one of the nation’s largest gold retailers, has resolved a criminal prosecution by agreeing to refund as much as $4.5 million to former customers.
Goldline agreed to an injunction that requires the company to “change its unfair sales practices” and to disclose price markups in recorded telephone conversations with customers, said Adam Radinsky, head of the Santa Monica city attorney’s consumer protection unit.
The Santa Monica city attorney in November filed a 19-count criminal complaint against Goldline, accusing the company of running a “bait and switch” operation in which customers seeking to invest in gold bullion were instead sold gold coins that were marked up more than 50 percent. Six current and former employees were also charged.
The settlement, approved Wednesday by Los Angeles County Superior Court Judge Lisa Hart Cole, resolved a consumer-protection lawsuit that the Santa Monica city attorney’s office filed against Goldline this month. As part of the agreement, the city attorney dismissed all of the criminal charges.
Goldline, which has used radio talk show host Glenn Beck as a pitchman, issued a statement that said the agreement would help the company “enhance its industry-leading disclosures to prospective precious metals buyers.”
Watchdog: Limit Fannie, Freddie legal fees more
WASHINGTON — A watchdog says the U.S. government regulator for Fannie Mae and Freddie Mac must do a better job limiting legal expenses paid by the two mortgage giants to their former executives facing lawsuits.
A report issued by the inspector general for the Federal Housing Finance Agency says Fannie and Freddie together have paid more than $109 million in legal expenses for former executives since 2004.
Taxpayers are footing the bill: The bailouts of the two companies have so far cost about $150 billion and that figure continues to grow.
The report says the agency should develop standard legal billing practices for Fannie and Freddie, expand its oversight and take other steps.
The agency says that it agrees with the inspector general’s recommendations to continue its efforts to control costs