Measuring The Effects of Dodd-Frank on Overdraft Programs
One year after the passing of the Dodd-Frank act, which placed increased restrictions on banks and other financial institutions, including limiting the amount of charges that banks can charge retailers for card-based transactions, consumers are starting to feel the impact. Banks are starting to do away with free checking, charging more for debit cards and other services, and simply increasing rates left and right. Understanding the effects of Dodd-Frank on overdraft programs one year later will help you understand just how far-reaching this new law is going to be.
Overdraft programs are programs that protect consumers should they spend more than they have in their checking account. In the past, banks would offer these programs, often for free, and would cover the difference and then charge the customer a fee at the time that they did so. One of the effects of Dodd-Frank on overdraft programs one year later is the fact that banks can no longer automatically enroll their customers in these programs as they relate to their debit cards. If they choose to offer overdraft protection for debit cards, they have to have the consumer’s permission to enroll them.
Many consumers are also finding their overdraft fees to be increasing. This is in line with an increase in fees across the board for consumers, as the act limited how much banks can charge to retailers. The answer to this, of course, is to watch yourself closely and make sure that you do not have overdraft problems to avoid these increased fees.
Other Problems from Dodd-Frank
Overdraft programs are not the only things affected by this legislation. Other problems from Dodd-Frank plague banks, consumers, and start-up businesses. The lowered fees that banks can charge retailers at the point of sale has led to increased costs to consumers across the board. It is becoming almost impossible to find free checking at major banks, unless you are able to maintain a large balance in your account. Interest rates on savings venues are dropping as well to help banks make up the lost revenue from retailers.
The new law is making it more expensive for startup businesses to raise the capital they need. Increased regulation makes it harder for these companies to get loans. This has a far-reaching impact, because a lack of startups leads to a lack of new job creation. A lack of new job creation means that the unemployment rates are continuing to rise. This, in turn leads to further economic struggles for America.
So are there any positive effects of the act, or will we only hear about problems from Dodd-Frank? Like any change, it is the negative impacts that are noticed first. The law is designed to protect consumers from “big banks,” so only time will really tell if it can do its job. For now, people and banks alike are adjusting to the changes and coping with the increased costs and expenses they both face. If you find yourself on the consumer end of things, expect your costs to increase somewhat as we enter this new era of banking.
