For many Latino families living paycheck to paycheck, the average overdraft fee of $34 can amount to much more than a mere inconvenience. All too often it leads them further and further into debt.

   In fact, billions of needed dollars are drained every year from working families.

   Banks and credit unions often describe their overdraft fee programs as a convenience for their costumers. In reality overdraft fees are another form of abusive lending burdening working families.

   According to the Center for Responsible Lending’s research, banks and credit unions collected more than $23.7 billion in overdraft fees in 2008 alone, a 35-percent increase from the nearly $18 billion they collected two years earlier. When the final tally comes in, 2009 surely will prove to be another record-setting year, with bankers expected to collect nearly $27 billion in overdraft fees.

   This explosion in overdraft fees has been particularly damaging for Latino families.  More often than not, these working families are new to the banking system and not fully aware of all the hidden practices designed to trigger overdraft fees in their accounts.  In many cases they don’t realize that they ever agreed to an overdraft program and don’t notice that an overdraft fee has been collected until it is too late.

   Banking was not always so dangerous. Just a few years ago, banks would simply deny a debit or ATM transaction if the account was overdrawn, a practice our survey shows most bank account holders would prefer. 

   Back then, banks didn’t purposely trigger overdrafts by rearranging transactions from biggest to smallest to trigger as many overdrafts as possible, or by unnecessarily delaying a deposit. But as the use of debit cards has increased, so has the likelihood that Latino families will find their accounts in the red from overdraft charges. 

   Just recently, the Federal Reserve announced a new rule that requires banks to ask and get an explicit “yes” from customers before signing them up for these high-cost overdraft programs. 

   When it takes effect July 1, it will hardly be enough.  Regulators still will have failed to address the high cost of such fees and the way and order such overdrafts are processed,  all of which ultimately hurt working families the most. 

   What this paltry new rule does do is highlight the dismal state of our current financial regulatory system and the need for better consumer protections. Federal bank regulators have known for years about abusive overdraft practices and about their proliferation. Yet they have been slow to do anything that would safeguard consumers from these practices.

   Overdraft abuses, just like unfair credit card practices and deceptive subprime mortgages, vividly underscore why Congress needs to revamp bank oversight by creating the Consumer Financial Protection Agency. This agency, as envisioned by the White House and now passed by the House, would be dedicated to safeguarding consumers.

   Now it’s up to the Senate. Latino families should support Senate action by contacting their elected officials. But until Congress acts, consumers should ask their bank for a lower-cost overdraft protection program or even think about switching to a bank that offers a better alternative.