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With new rules on debit card changes taking effect this summer, banks grapple with how to institute changes amid likely lost revenue

  • Matthew Enos,front, and Taylor Price,rear, fellow linebackers on the SRJC football team, stop to use their ATM cards for snacks before returning to classes and football practice Thursday, March 11 in Santa Rosa. Millions of ATM card users will benefit from new regulations limiting overdraft fees imposed by banks.

Taylor Price, who uses a debit card for almost all his purchases, thinks the new federal rules that prevent banks from charging overdraft fees without his permission could save him big in the future.

Last fall, the 19-year-old college student ordered his usual cheap lunch: two tacos for $1 at Jack in the Box in Santa Rosa.

To his surprise, the cash-strapped student ended up paying about $41 for those two tacos because he didn't have enough money in his account and he got charged overdraft fees by Wells Fargo.

"I knew I was low," Price said. "But I thought if I didn't have the money, it wouldn't work."

He was wrong. But come this summer, that changes.

Under new federal regulations, banks and credit unions will no longer be able to process debit or ATM card transactions unless the underlying checking account has sufficient funds -- or the cardholder gives explicit permission to process underfunded transactions.

The new rules take effect July 1 and apply to existing customer accounts starting Aug. 15.

The rule change has been widely applauded by consumer advocacy groups, which were frustrated that most banks automatically enrolled customers into the fee-laden programs.

But it could cost financial institutions billions of dollars in lost revenue, and the industry is still grappling with how to respond.

Exchange Bank, Sonoma County's largest local bank, generates about $2 million in overdraft fees on debit cards annually, said Brad Hunter, head of electronic banking. Officials are still determining how to deal with any revenue loss from the new rules.


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