Banks cannot legally charge overdraft fees for cash withdrawals or non-recurring debit card transactions without consent from the customer, as of July 1, 2010, according to the U.S. Federal Reserve. The bank must provide the customer with the terms and fees for its overdraft services before the customer can legally opt in. The Federal Deposit Insurance Corporation guarantees other consumer protections to prevent liability in the case of theft or bank error, according to the FDIC.
The overdraft rule does not apply to checks, automated clearing house transfers or preauthorized recurring payments, and banks can overdraw a customer’s account and charge fees for these transactions without consent. Some banks offer overdraft services that waive overdraft fees for individual transactions and instead charge a flat monthly fee, explains the Federal Reserve. These services are subject to the same rules, and customers must authorize the bank to overdraft for non-recurring transactions and cash withdrawals. Banks are not allowed to penalize customers who do not opt in for overdraft protection services or reward customers who do opt in.
The FDIC insures member banks to protect consumer deposits. Under FDIC requirements, if a consumer loses a debit card and notifies the bank within two days, the bank cannot hold the customer liable for more than $50 of unauthorized charges, explains the FDIC. This liability rises up to $500 if the customer notifies the bank after two days. Customers are not liable for unauthorized bank transfers if they notify their banks within 60 days of the transactions.