Banks may be required to disclose costs of overdraft programs

WASHINGTON -- The Federal Reserve is considering whether banks should be required to tell consumers more about the costs of programs that let customers overdraw accounts by covering checks that would otherwise bounce.

The central bank recently asked for public comment on the so-called "bounce protection" programs and whether they should be made subject to truth-in-lending rules that require banks to disclose interest rates, fees and other information to consumers.

Comments are due by Monday. The Fed noted that under the programs, banks routinely cover overdrafts on checking accounts rather than assessing each customer's situation on a case-by-case basis.

At least 1,000 U.S. banks use the programs to encourage customers with low balances to overdraw their accounts, allowing the banks to collect billions of dollars in fees, The New York Times reported in Wednesday's editions.

The fees are paid disproportionately by low- and moderate-income people, the newspaper said, citing banking industry consultants.

American Bankers Association spokeswoman Charlotte Birch had no immediate comment.

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American Bankers Association

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