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Consumer watchdog to start overdraft inquiry

WASHINGTON - The Consumer Financial Protection Bureau is expected to launch an inquiry today into banks’ overdraft practices, which have been in regulatory cross hairs in recent years.

The bureau said it will look into whether banks are reordering customers’ debit-card charges to maximize overdraft fees. Reordering transactions can double or triple penalties, and the practice has been the target of several class-action lawsuits against the nation’s biggest banks.

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The inquiry also will focus on bank overdraft policies, how they market the plans, and their impact on low-income and young consumers.

Overdraft fees have long irked consumers, who have complained that withdrawals of as little as $3 from their bank accounts have resulted in penalties as high as $37. As the recession squeezed Americans’ budgets and anger at the financial industry reached fever pitch, regulators and lawmakers began moving to curtail banks’ fees.

One thing regulators left unaddressed, however, was the order that banks processed charges. That issue has been winding its way through the nation’s court system instead.

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