Consumers Can "Opt Out" of Excessive Overdraft Fees

Rapid City, SDLawmakers have pushed back against the banking industry to protect consumers from excessive overdraft fees. Now consumers will have to "opt in" to allow their bank to cover overdrafts.

The law takes affect August 15 and will not allow any debit or ATM transaction that overdraw one's account to be processed unless he or she opts in for overdraft coverage, which will cost the typical fee of up to $35, according to the Rapid City Journal.

The banking industry is upset with the law changes, claiming that excessive overdraft fees are a type of consumer protection.

"A service that we've provided automatically for customers is now one that will be specifically asked for or agreed to," Marnie Herrmann, vice president of marketing for Security First Bank, told the news source. "For some people, they don't want to overdraw their account, and that's fine, and that should be their choice. Other customers like to have that out there as an option just in case."

While banks view such fees as a service to their customers, they are also a large source of revenue for banks and a major burden for most consumers.

The law will not affect paper checks and recurring automatic withdrawals from a checking account, like scheduled monthly bill payments.