OVER DRAFTED….A friend of mine was recently telling me the story of how he had been automatically signed up in the fine print of a new credit card for some sort of insanely abusive overdraft protection from his bank. He eventually got rid of it, but then was forced to construct some kind of monstrous Rube Goldberg scheme to protect him from overdrafts without bankrupting him. I think it involved three linked credit cards, two checking accounts, a savings account with a permanent balance of five dollars, and a signed note from Alan Greenspan.

Anyway, this story is for him:

Consumers are paying huge fees on short-term loans that cover them when they overdraw their checking accounts, under programs that banks and credit unions often enroll customers in without their knowledge, a new study says.

….The study, released hours before a House hearing on a bill that would require clear disclosure of overdraft charges, estimated that the programs cost consumers $17.5 billion in fees last year, up sharply from $10.3 billion two years earlier….The fees now exceed the $15.8 billion a year that banks temporarily lend customers via the overdraft programs, according to CRL, a nonprofit consumer advocacy group.

Did you catch that? Last year banks levied finance charges fees of $17.5 billion on short-term loans of $15.8 billion. And they did this via programs most people don’t even know they’re enrolled in.

So: why are overdrafts up? Because use of debit cards is up, and a lot of people assume that a debit card transaction will be denied if the account has insufficient funds. And why is use of debit cards up? Because, as anyone who watches teevee knows, the banking industry has been pushing them with about the same zeal as a street corner crack merchant.

Still, times are tough. $7 billion in additional overdraft fees is probably barely keeping the industry afloat. That’s why they needed the extra couple of billion they got from the passage of 2005’s bankruptcy bill. That should keep the corporate jets fueled for another few months.