US Bank Screw-You-Overdraft Protection (Part 1)
Ever been charged an overdraft fee by your bank? Sucks for you and me, but banks love it. Overdraft fees accounted for US$50 billion in bank revenue in 2007. As a temporary loan, they can mean as much as 2,000% interest for the bank.
Ever wanted to turn off overdraft protection? US Bank is doing everything they can to make sure you don't find out how:
Turns out that Federal banking regulations require banks to allow customers to opt out of so-called "courtesy" overdraft protection systems. When you opt out, any charges that can't be covered by your current available balance will be declined.
Here's how it works when you turn off overdraft protection: if you have $500 in the bank, you clear a $490 check, and then you try to make a $30 purchase with your debit card, the charge will be declined. In this instance you won't have a pesky $28-$35 overdraft fee per overdrawn item, plus a $7-$10/day negative balance fee.
However, this opt-out does not save your ass if, for example, you do pay-at-the-pump authorizations, where they only ping your card for a dollar and let you go on your way with a full tank of gas, and the final charge overdrafts you. In this case, you still pay a fee. This also happens when you go out to dinner and your final total doesn't clear until the tip is factored in. To avoid this, always pay at the gas counter with a set amount instead of at the pump, and always tip your server in cash.
How to opt-out of courtesy overdraft
Every bank has a different term and system, but the rules are generally the same:
Don't backup your account with a credit card or savings account
This is scam #2 in the banking universe. While bankers will try to convince you to trade in your overdraft protection for credit card protection, it's still a bad idea. US Bank, for example, charges for every overdraft incident where money from a protection source is applied to your account. You may pay as little as $5, but you're still paying for the privilege of US Bank automatically transferring money from one of your accounts to another, a service that's free when you do it yourself online or through the automated phone system, or only $2 when you have a telephone banker do it.
How I came to know all this: horrible customer service
Back in December, I called up US Bank about an overdraft fee I had. It was totally my fault, so I didn't ask them to fix it. I just asked if there's anything else I could do to turn off overdraft protection. That must have been the magic word because the telephone banking rep said he could turn off courtesy overdraft protection for me over the phone.
Of course, when I had an overdraft in January, I was pissed. I called again, got another rep who confirmed the same courtesy overdraft protection but said I had to go to my local branch to do it. So I went to my branch on January 11.
I waited 10 minutes in the bank lobby while Andre Branch, the football player sized assistant manager, chatted for 10 minutes on the phone with someone about non-business stuff. When he was finally ready to see me, I retold him my story and said I wanted to cancel my courtesy overdraft protection. He looked at me confused and said he didn't understand. I tried to explain it to him for several more minutes.
Finally, he said, "let me talk to my people." He picked up the phone, dialed a number and said, "do you know what this guy is talking about?" as he looked across the room. I looked, too, and he had dialed one of the tellers to ask her! She didn't know, either, so he suggested that what I was asking for didn't exist. I suggested that maybe he should do a little more research.
He called his district office while I called telephone banking again. I confirmed for a third time that you can opt out of courtesy overdraft protection. Once the manager heard me confirm it, he piped in that he knew it now and it was called "OBP code" (thus leading to my research above -- thanks Consumerist, the world's best consumer advocate website!).
He hassled me if I really wanted to do this, emphasized that the change was permanent, and I confirmed. While he was putting codes into the computer, he made the off-hand comment, "I'm not surprised nobody else knew about this. It's a very obscure feature."
To which I replied, "three telephone bankers knew about this feature. You're an assistant branch manager. You really should know. There's no excuse," and glared at him.
Then he got pissy: "look, I've been nothing but nice to you and I've done everything you've asked, and now you're being a smart ass." "Excuse me?" "You heard me. You brought it, now I'm bringin' it. You can go sit in the lobby." "I'm not done, no thank you." "You can go sit in the lobby."
(Please note that I had asked him to reverse my latest overdraft fee as a courtesy for this mix-up. It has not been reversed.)
At which point I went home and wrote a complaint letter to the branch manager, the central banking management office and the CEO. The branch letter was delivered the next Monday. In the letter, I detailed the incident, and included a copy of the US Bank internal memo about OBP Code 09 that was dated August 2007 as evidence that the assistant branch manager should have known about the feature, or knew about it and tried to deceive me, which either makes him incompetent or a liar.
You can see the response I got here.
(Last note: I try to keep my banking balance at zero because I transfer all my money into my PayPal Mastercard debit card, which gives me 5.2% APY on my balance and pays 1% cash back immediately for every credit purchase. It also doesn't charge overdraft fees or negative balance fees. The only time I have money in my US Bank account is when I need to pay rent. However, once in a while an organization will have my old card on file and I'll forget that detail. I'd rather be notified that an old charge somewhere was declined rather than incur more dastardly overdraft fees.)
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[ banking published on 2008-02-06 | Permalink (1,685) | ]
7 Comments
I think the bottom line is...don't overdraw your account. Be a responsible adult! Grow up. You've put way too much time and energy into this little "spy" project. It's a free world. You have the option to bank anywhere. If you don't like US Bank or their rules then go elsewhere. You could have put all of this time/energy into making sure your account is good and creditors are not choosing the wrong account, etc. Your focus is obviously not where it should be. It's kind of humorous. It's not like you've uncovered some secret society. All banks have rules and probably the same rules. A company's information is proprietary so they ask for it back, that's common sense. I'm totally confused on what your point is or where you're trying to go with it. Sounds like you may need to take a class on money management rather than how to use spyware...lol. It's funny how anger gets the best of you sometimes especially when you were to blame and not the bank in this case.
@Common Sense:
I'm not complaining about overdraft fees. I'm complaining that US Bank is actively denying customers their federal right to opt out of the horrible courtesy overdraft system.
I never complained that I incurred a fee when I overdrew my account that one month. I complained that US Bank made it a chore to turn off "courtesy" overdraft protection with an assistant branch manager who didn't know the rules, or lied about them, and only complied when I pushed him on the issue and another employee at the same branch who outright said the request couldn't be done.
I'm complaining that either US Bank is incompetent, or they lie to customers in order to retain this very valuable revenue stream called courtesy overdraft protection.
As for your attitude, I suggest you read the article before shooting your mouth off.
Wachovia is a screw their customer bank also! If you have a charge "on hold" that counts against your available balance. If you make a large purchase, and a large deposit, the purchase goes "on hold" immediately - authorizing a future payment, the deposit takes time to clear. Here's where it gets fuzzy - and their customer service rep doesn't understand why either (except to screw their customer). The previous "on hold" items are presented for payment resulting in an overdraft. This is caused by the "on hold" large payment which still has not been presented for payment. These items are charged an overdraft charge, as is the "on hold" item which caused all of this rucus (still not yet actually presented for payment) all the while waiting for the deposit to clear.
My question is how can they justify charging overdrafts for funds they have not actually released? Why did they ignore the deposit in process - it was a cash after hours ATM deposit. They gave themselves the benifit of the doubt so they could charge an exorbidant number of overdraft fees!
SO LONG WALK OVER YA BANK YOU F***ING THIEVES!
RFJason:
You say that federal regulations require banks to let their customers opt-out of the overdraft protection. Unfortunately, from what I could find, it's not required as-of-yet but just being proposed (http://www.federalreserve.gov/newsevents/press/bcreg/20080502a.htm). Even the link in your article suggests the opt-out feature is a "best practice" and is "recommended" but doesn't state that it's required.
I only bring this up because I bank with US Bank and was wanting to opt-out of the overdraft fees. My husband when into a US Bank branch and the Customer Service Rep told him this was "impossible". I then called the Customer Service number and a Customer Service Rep named Brian (#72657) who told me this cannot be done. I even confirmed this with my friend who works as a CRS with US Bank who told me if I want this feature removed I better bring something in with me stating it's required. At this time I cannot find any documents stating that the opt-out feature is required.
April
aprilspeers@gmail.com
@April:
I don't think you fully understood the article. So let me reiterate:
- Federal regulation DOES require banks to offer a courtesy overdraft opt-out.
- US Bank DOES have an opt out system that they internally call "OBP Code 09."
- I learned this from the article on Consumerist.com.
- The US Bank internal memo on OBP Code 09 is publicly available.
- I verified at my local branch that you can in fact turn off courtesy overdraft protection using OBP Code 09. Courtesy overdraft protection is turned off on my checking account.
You have to fight very hard with your branch manager to get it done. They'll deny up & down that the process cannot be done. But once you show them the memo and call them on their lies, they'll comply.
I suggest you print a copy of the US Bank memo from http://consumerist.com/consumer/insiders/us-bank-courtesy-overdraft-protection-demystified-312504.php and take it back to your branch and demand that the branch manager handle your request personally. Don't take no for an answer, and don't leave until you get what you want.
I just went round and round with my bank manager but finnaly got it turned off but I had to pull teeth to get it done. I finally mentioned OPB CODE 09 and it was done. I also dont like how they process the highest amout first so they maximise the amount of overdraft fees. The banking system needs some kind of overhaul.
WhatRumors.com
So which banks do and do not charge overdrafts?
Wamu's is $30 each every time... I personally hate doing business with wamu!