New Overdraft Rules are Bad for Consumers

The battle over overdraft charges highlights what has become a growing concern - government's involvement in private business and its choosing of winners and losers. While many of the proposed changes - such as allowing consumers to opt out of the overdraft program and requiring approval for covering an overdraft - appear reasonable, the reality is quite different.

Overdraft fees are a primary revenue source for most banks, and with growing investment losses, the new fees are well-suited to fill the profit gap. The credit these banks provide is risky, and requiring these services to be regulated will completely push the service out of the market. The cost of the added risk will be shifted to other fees elsewhere, and prudent customers will pay higher fees to subsidize the risky.

The endless quest by government to regulate away personal responsibility is alarming. Regulators should work with banks to make overdraft programs more transparent and let the customer decide whether the service is worth having.