Many of us use our bank accounts or bank debit cards to pay bills and make purchases. In recognition of the start of Financial Literacy Month, Michigan Attorney General Dana Nessel is re-issuing her Overdraft Fee Rules alert to educate consumers about how banks must handle account overdrafts and what the customer is entitled to know about a bank’s overdraft policy, so they’re not fooled by fees this April or any time of the year.
Rules enacted by the Federal Reserve Board in 2010 prohibited banks from charging overdraft fees for ATM withdrawals and debit card purchases unless the customer has opted into the bank’s overdraft protection service. With overdraft protection, the bank allows withdrawals and debit card purchases to process even if the transaction results in an overdraft.
“Our ever-present reliance on banks and debit card transactions holds the possibility of racking up hefty fees if we don’t know the rules,” Nessel said. “Consumers who understand the regulations banks must adhere to regarding overdraft fees are better equipped to make informed decisions and protect their financial well-being.”
When a bank allows a transaction to clear when the consumer’s account does not contain enough money to cover it, the bank is, essentially, extending a loan to the consumer. However, these loans are exempt from the Truth in Lending Act (TILA), which protects consumers from unfair credit card and billing practices. Through this loophole, banks are allowed to lend money to cover overdrafts without providing clear disclosures and other protections, costing consumers billions each year. In January, the Consumer Financial Protection Bureau proposed a rule to reduce what it called “excessive overdraft fees” and to close the truth-in-lending loophole by treating overdraft loans as credit subject to TILA with clear and consistent requirements.
On its website, Investopedia rolled out five areas that consumers can focus on to expand their financial literacy:
• Budgeting – Learning healthy spending habits begins with budgeting. Identifying monthly expenses can help track and control your spending.
• Investing – Your decision about what to invest in and how much should take into account the risks and potential rewards of the different investments. Whether it’s stocks, bonds, ETFs, or mutual funds, financial literacy means understanding that these investments all come with risks. The key is to take educated risks that align with your financial goals and risk comfort level.
• Bank Accounts – They are one step in creating a stable financial future. Financial literacy means understanding the different types of bank accounts, their benefits, features, and fees, as well as how they fit with your financial goals.
• Personal Finance – This is the intersection of financial literacy and personal decision-making. It is charting a path to meeting your financial goals and sticking to it.
• Credit Cards – They allow you to borrow money from the card issuer and pay it back over time. For every month you don’t pay your balance in full, you are charged interest. As of the fourth quarter of 2022, Americans owed $986 billion in credit card debt. Financial literacy means being cautious about using credit and avoiding spending more money than you have.
In 2003, the U.S. House of Representatives passed a resolution requesting President George W. Bush to issue a “proclamation calling on the Federal Government, States, localities, schools, nonprofit organizations,
businesses, other entities, and the people of the United States to observe “Financial Literacy for Youth Month” with appropriate programs and activities.” Financial Literacy Month was officially established in the U.S. in 2004 with the goal of highlighting the importance of being financially literate and encouraging consumers to acquire skills to help them become financially smart.
This month is meant to shine a light on the critical role personal finance plays in providing us with the financial freedom to take control of our lives and keep up with the world’s changing financial landscape. Making the path to financial literacy a lifelong pursuit is a step in the right direction.
To file a complaint with the attorney general, or get additional information, contact:
Consumer Protection Team
P.O. Box 30213
Lansing, MI 48909
517-335-7599
Fax: 517-241-3771
Toll-free: 877-765-8388
Online complaint form at https://secure.ag.state.mi.us/complaints/consumer.aspx
Rules enacted by the Federal Reserve Board in 2010 prohibited banks from charging overdraft fees for ATM withdrawals and debit card purchases unless the customer has opted into the bank’s overdraft protection service. With overdraft protection, the bank allows withdrawals and debit card purchases to process even if the transaction results in an overdraft.
“Our ever-present reliance on banks and debit card transactions holds the possibility of racking up hefty fees if we don’t know the rules,” Nessel said. “Consumers who understand the regulations banks must adhere to regarding overdraft fees are better equipped to make informed decisions and protect their financial well-being.”
When a bank allows a transaction to clear when the consumer’s account does not contain enough money to cover it, the bank is, essentially, extending a loan to the consumer. However, these loans are exempt from the Truth in Lending Act (TILA), which protects consumers from unfair credit card and billing practices. Through this loophole, banks are allowed to lend money to cover overdrafts without providing clear disclosures and other protections, costing consumers billions each year. In January, the Consumer Financial Protection Bureau proposed a rule to reduce what it called “excessive overdraft fees” and to close the truth-in-lending loophole by treating overdraft loans as credit subject to TILA with clear and consistent requirements.
On its website, Investopedia rolled out five areas that consumers can focus on to expand their financial literacy:
• Budgeting – Learning healthy spending habits begins with budgeting. Identifying monthly expenses can help track and control your spending.
• Investing – Your decision about what to invest in and how much should take into account the risks and potential rewards of the different investments. Whether it’s stocks, bonds, ETFs, or mutual funds, financial literacy means understanding that these investments all come with risks. The key is to take educated risks that align with your financial goals and risk comfort level.
• Bank Accounts – They are one step in creating a stable financial future. Financial literacy means understanding the different types of bank accounts, their benefits, features, and fees, as well as how they fit with your financial goals.
• Personal Finance – This is the intersection of financial literacy and personal decision-making. It is charting a path to meeting your financial goals and sticking to it.
• Credit Cards – They allow you to borrow money from the card issuer and pay it back over time. For every month you don’t pay your balance in full, you are charged interest. As of the fourth quarter of 2022, Americans owed $986 billion in credit card debt. Financial literacy means being cautious about using credit and avoiding spending more money than you have.
In 2003, the U.S. House of Representatives passed a resolution requesting President George W. Bush to issue a “proclamation calling on the Federal Government, States, localities, schools, nonprofit organizations,
businesses, other entities, and the people of the United States to observe “Financial Literacy for Youth Month” with appropriate programs and activities.” Financial Literacy Month was officially established in the U.S. in 2004 with the goal of highlighting the importance of being financially literate and encouraging consumers to acquire skills to help them become financially smart.
This month is meant to shine a light on the critical role personal finance plays in providing us with the financial freedom to take control of our lives and keep up with the world’s changing financial landscape. Making the path to financial literacy a lifelong pursuit is a step in the right direction.
To file a complaint with the attorney general, or get additional information, contact:
Consumer Protection Team
P.O. Box 30213
Lansing, MI 48909
517-335-7599
Fax: 517-241-3771
Toll-free: 877-765-8388
Online complaint form at https://secure.ag.state.mi.us/complaints/consumer.aspx
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