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The four organizations conducted 64 mystery shopping visits at 39 bank branches in Chicago, Durham, New York City, and Oakland, including Bank of America, BB&T, BMOHarris, Capital One, Chase, Citi, SunTrust, and Wells Fargo. In Chicago, mystery shoppers visited Bank of America, BMO Harris, Chase, and Citi.

An overdraft occurs when a bank advances money (usually at high interest rates or fees) to customers who lack sufficient funds in their accounts to cover a debit purchase, ATM withdrawal, check, or other payment. Under federal rules, customers must affirmatively opt in to debit and ATM overdraft but could still be charged for checks or auto bill pay. The way different transactions are treated is one of the issues that banks in the mystery shopping project did not always explain clearly. The resulting confusion makes it difficult for consumers to understand the real costs of overdraft and make informed decisions. The high costs and unpredictability of overdraft fees (due to practices such as reordering payments from high to low) also discourage consumers from getting bank accounts and push customers out of mainstream banking into higher-cost alternative financial services such as check cashers.

Specific recommendations for federal banking regulators and the CFPB include:

• Prohibit overdraft fees on all ATM withdrawals and debit card transactions.

• Limit the fees a bank may charge for overdrafts to an amount commensurate with the actual cost of the transaction to the bank and proportional to the amount overdrawn.

• Prohibit banks from reordering transactions to maximize overdraft fees.

• Prohibit banks from providing financial incentives to branch or bank employees for the sale of overdraft products to customers.

• Create a uniform standard for how banks verbally describe overdraft products and fees.

• Require training of bank employees on the verbal explanation of overdraft standards and conduct periodic reviews of training and compliance.

• Limit the number of times a financial institution may impose an overdraft charge to once a month, or a maximum of six charges in a 12-month period, whichever comes first.

Click here for the full report. Consumers who have complaints about overdraft are encouraged to submit them to CFPB at