Fed changes overdraft rules

WASHINGTON, Nov. 12 (UPI) -- The U.S. Federal Reserve has closed the option for banks to charge overdrafts fees on two common transactions unless the consumer agrees to allow the fees.

The rule changes announced by the Federal Reserve Board Thursday include overdrafts resulting from automated teller machine withdrawals and one-time debit card transactions.

Effective July 1, 2010, banks not be allowed to charge the fees unless consumers agree in advance. Consumers don't have to opt out of the fees, they have to opt in to the service, which normally includes a fee.

Consumer surveys show some appreciate the service "to cover important bills," the Fed said in a statement.

Banks will also be required to provide information, including applicable fees, if a consumer chooses to go with the service.

"The final overdraft rules represent an important step forward in consumer protection. Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service," said Fed Chairman Ben Bernanke.

"Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees," said Governor Elizabeth Duke, the chair of the Federal Reserve Board's Committee on Consumer and Community Affairs.