Article courtesy of Bloomberg News

The Consumer Financial Protection Bureau is scrutinizing nine banks including JPMorgan Chase, Wells Fargo, and Bank of America on how they persuade customers to enroll in overdraft protection and their justification for fees. Planning enforcement against banks that "exploit consumers with deceptive marketing", the agency will examine marketing material and customer service scripts to determine whether banks are confusing customers into purchasing protection.

Bureau examiners have conveyed "a tone of skepticism that this is really a good product for borrowers," said Jo Ann Barefoot of Washington-based Treliant Risk Advisors, who counsels banks on dealing with federal supervisors.

When a customer enrolled in overdraft protection makes a debit that puts an account into negative balance, some banks approve the transaction but charge a flat fee as well as interest on the amount advanced. People that don't enroll get overdrafts denied at the point of sale. Large banks charge an average $35 per overdraft, compared with $25 at community banks and credit union.

In 2011, Wells Fargo's retail division took $4.3 billion from fees, including overdrafts, roughly equal to a quarter of the bank's net income for the year.

JPMorgan brought in $3.2 billion in fees related to lending and deposits the same year.

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Article by Carter Dougherty and Margaret Collins for Bloomberg News