Fed bars ATM card overdraft fees absent opt-in

WASHINGTON (Reuters) - The U.S. Federal Reserve on Thursday banned overdraft fees on automated-teller-machine and debit-card transactions unless consumers have actively selected an overdraft protection service.

The rules go into effect July 1.

"The final overdraft rules represent an important step forward in consumer protection," Federal Reserve Chairman Ben Bernanke said in a statement.

The rules do not cover fees for overdrawn checks, Fed officials told reporters. The Fed found that consumers were willing to pay fees to ensure that any overdrawn checks are paid, the officials said.

Nor do the rules bar fees on transactions from recurring debit-card transactions, such as ones consumers set up to make regular payments, the officials added.

ATM and debit card transactions are typically discretionary purchases, the officials said. Consumers frequently use checks for bills that they want paid no matter what.

Bank regulators have been under pressure to beef up consumer protections following a damaging financial collapse brought on in part by reckless lending practices. Lawmakers critical of regulators' failure to rein in those practices are considering stripping consumer protection functions from the Fed and other financial regulators and entrusting them to a dedicated consumer protection agency.

Senate Banking Committee Chairman Christopher Dodd has introduced legislation limiting bank overdraft fees, and Representative Carolyn Maloney has introduced a similar bill in the House of Representatives.

(Reporting by Mark Felsenthal; Editing by Neil Stempleman)