Banks charged $27 for overdraft fees in 2006-US FDIC

WASHINGTON, Dec 2 (Reuters) - Banks typically charged a customer $27 for overdrawing on accounts in 2006 and failed to notify of the fee until after the transaction, according to a U.S. regulatory report likely to draw congressional criticism.

In a study of 1,171 of its regulated banks, the U.S. Federal Deposit Insurance Corp on Tuesday said small and large banks charged between $10 and $38 per overdraft, which is when a customer takes out more money than is in a bank account.

The FDIC said it found that about a quarter of banks also charged fees or interest if the borrower's account maintained a negative balance after withdrawing too much from an automated teller machine or a check.

For a customer who repays an overdraft of $20 in two weeks, the $27 fee would represent an annual percentage rate of 3,520 percent, the FDIC said.

In 2006, banks earned about $1.97 billion in so-called nonsufficient funds (NSF), which was about 74 percent of the $2.66 billion in service charges on deposit accounts, according to the FDIC's two-year report.

NSF earnings represented about 6 percent of the industry's total net operating revenues.

U.S. lawmakers have criticized banks for not providing customers the ability to opt-out of what banks call overdraft "protection."

The FDIC said more than 75 percent of the banks surveyed automatically enrolled customers in automated overdraft plans, but customers were usually permitted to opt out.

Overdraft programs ranged from $85 to $10,000 with the median credit limit at $500, the regulatory agency said.

U.S. lawmakers are concerned about the timing of overdraft fee notices. The FDIC said it found that the majority of banks informed customers of a fee after an ATM or debit transaction, denying customers an opportunity to cancel the transaction and avoid a fee.

The agency study also found that customers in low-income neighborhoods were more likely to incur overdraft charges than higher-income areas. More than 38 percent of low-income accounts had at least one NSF transaction, compared with 22 percent in upper-income accounts. (Reporting by John Poirier; Editing by Brian Moss)