Four years after banks were required to ask customers if they want overdraft protection, most consumers still don't know whether they've been enrolled in those plans, according to an advocacy group's new report.

Because of the widespread confusion, the Consumer Financial Protection Bureau should require banks to be clearer in how they communicate with their customers about the optional overdraft plans. That is one of several recommendations made by the Pew Charitable Trusts in its latest report on the banking industry.

Additionally, banks should lower the fees they charge customers for overdraft protection to a "reasonable" level, Pew says. In Pew's survey results, more than half of respondents said they paid at least $30 in overdraft fees for each time they lacked sufficient funds. Twenty percent said they paid more than $100.

Pew has conducted a long-running campaign urging the CFPB to write rules forcing banks to summarize key information about checking account fees, and to more clearly communicate with customers about overdraft protection.

The CFPB has appeared to agree with many of Pew's findings. The agency said banks were still gouging customers on overdraft fees in a report a year ago. In its spring 2014 rulemaking agenda, the CFPB said that it's "researching and considering whether rulemaking is warranted in the areas of payday and deposit advance products, as well as consumer overdraft products."

The American Bankers Association defended current industry practices.

Consumers receive "multiple disclosures," including a "simple" one-page sign-up notice, written confirmation of their choices and reminders about how often they have used overdraft protection and how much they have paid for it, says Nessa Feddis, the deputy chief counsel of consumer protection at the ABA.

"Overdraft protection is a matter of informed consumer choice, and those who choose to use it understand and value it," Feddis says. "Consumers who opt in for debit card overdraft protection know the fees and can opt out at any time."

But confusion about overdraft fees persists, Pew officials say. About 52% of those who participated in the newest Pew survey said they didn't know if their bank offered overdraft protection, or don't remember signing up for it. The results were based on Pew's survey in December of 1,804 consumers.

That's a minor improvement from the 2012 results of Pew's survey, in which 54% of respondents said they didn't recall whether their bank offered them overdraft protection.

The latest results show that banks are still not doing enough to explain overdraft protection to their customers, says Susan Weinstock, director of consumer banking research at Pew.

"Consumers are still befuddled about whether they opted in," Weinstock said during a conference call Thursday to discuss the report with the media. "More than half say that they were unaware that their bank even offered overdraft coverage."

The CFPB should require banks and credit unions to give customers "clear, comprehensive and uniform pricing information for all available overdraft options."

Underscoring Pew's recommendation is a finding from its report that 68% said they don't want overdraft protection anyway. If a customer declines his bank or credit union's offer of overdraft protection, then he pays no fees if an attempted debit card purchase is declined. Instead, the customer simply is not allowed to make the purchase. Bounced checks could still prompt insufficient-funds fees.

It's in banks' obvious financial interests for overdraft-protection plans to continue. Banks and credit unions collected about $16.7 billion in overdraft fees in 2011, according to a July 2013 study by the Center for Responsible Lending.

Since overdraft fees generate a significant amount of noninterest income, banks want to retain the programs. Some have explored ways to improve the program to make it more palatable to consumers.

Many consumers view overdraft fees as a type of payday loan, and banks should develop their services with that in mind, says Robert Giltner, a bank consultant in Elizabethtown, Ky. Banks should make their fee schedules for overdraft protection clearer, he says. Doing so could help banks increase fee income.

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