Recently, the Federal Reserve said that beginning next July financial institutions will be prohibited from charging overdraft fees without their clients’ consent.
The new regulations mean that banks will only be allowed to levy fees for overdrafts on ATM and debit card transactions if account holders sign up for the plan.
According to Fed Chairman Ben Bernanke the regulations will protect consumers so that "both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service."
While the move was welcomed by Consumers Union, its representative stated that the new rules do not go far enough and said proposals currently considered in Congress would provide stronger protections.
Legislation introduced by House Financial Services Committee chairman Barney Frank of Massachusetts and Senate Banking Committee chairman Christopher Dodd of Connecticut, both Democrats, also includes a ban on automatic overdraft protection of checks and recurring charges which the Fed failed to ban.
Dodd has furthermore introduced legislation to strip the Fed of authority for regulating banks and give Congress a greater voice in naming the central bank officials who set interest rates, according to Bloomberg.