In a bill currently in front of congress for review, the Overdraft Protection Act of 2009 would “amend the Truth in Lending Act to establish fair and transparent practices related to the marketing and provision of overdraft coverage programs at depository institutions, and for other purposes.” (http://www.govtrack.us/congress/bill.xpd?bill=h111-3904)

Did you know that many banks currently process your charges out of order? Most will process the largest transaction first, which decreases your account balance faster, and therefore has the potential to cause multiple overdraft penalties. CBS 13 featured a news segment on this practice (http://cbs13.com/video/?id=63174@kovr.dayport.com) with specific examples from customers of Bank of America. These people’s statements show that several days worth of transactions are processed in a different order – according to the amount of the transaction instead of the date the transaction occurred. So while you (and most other customers!) would expect your transactions to be processed chronologically by date, you think you have more money available than you really do. Where you think you may be right on target, or perhaps just a few dollars overdrawn for your last transaction – after the bank re-orders your transactions so the largest transactions are deducted from your balance first – you run out of money in your account balance much sooner than expected and end up with a number of overdraft fees (of about $35 each, on average).
The policy of re-ordering your transactions is not limited to Bank of America however. It seems to be more of an industry standard. In fact, banks report the total for overdraft fees in 2009 at an estimated $38.5 billion.

Some people respond to this practice by saying it’s the customers fault for spending so close to their available balance and they deserve to be hit with multiple overdraft charges. Other people think this is entirely unfair, and should be illegal. Why should a bank have the ability to re-order your transactions? Some banks support the policy by saying they place the highest priced transactions first because they assume they are the most important – like your mortgage, rent, or car payment for example. Should a bank be able to decide which of your transactions are more important to you and clear them based on those assumptions? Or should they just clear them chronologically?

Hopefully the Overdraft Protection Act of 2009 will be passed and will address these banking policies.