The Consumer Federation of America released a report Thursday accusing banks of charging up to 32 times what it costs to process a bounced check.
The consumer group said the banking industry makes $6.7 billion a year off bounced checks: $5.6 billion from consumers in bounced-check charges and $1.1 billion for returning deposited checks that bounce.
Even if the banking industry deducts the $600 million lost to check fraud each year, the total exceeds $5.5 billion, the Consumer Federation said. "That is so much money extracted from the consumer relative to the costs of the bank to process it," said Jean Ann Fox, the group's director of consumer protection.
The American Bankers Association response was simple: Don't write bad checks.
"Charges for bounced checks are really quite simple to explain," said Donald G. Ogilvie, ABA executive vice president. "They discourage people from writing bad checks much like parking tickets discourage people from parking next to fire hydrants."
The ABA noted that less than 1% of the more than 174 million checks processed each day are returned.
More than 80% of all banks offer overdraft protection, the ABA added.
The consumer group's report shows that large banks charge the highest average bounced-check fee at $20.29, compared with $18.97 for regional banks and $15.05 for community banks.