Due to confusing overdraft protection disclosure information, consumers who have opted in to overdraft protection may be paying more than the service is worth, according to the Consumer Financial Protection Bureau.

An overdraft fee occurs when a consumer attempts to complete a transaction but lacks the funds in their accounts. If this occurs, and a consumer has not opted into overdraft protection, the transaction with be denied. Overdraft protection programs offered by banks allow these transactions to clear, despite the lack of funds. When a bank pays the transaction anyways, the customer is charged a fee, typically around $34. Overdraft protection disclosure makes consumers aware of the options.

Although overdraft protection programs allow consumers to overdraft their account, new reports suggest that consumers who regularly overdraft their checking accounts regularly pay around $450 more in fees than if they had not opted in. These fees charged to frequent overdraft protection users reportedly comprises 79 percent of all charged overdraft fees. Those who overdraft their accounts frequently also have lower credit scores and lower end of day balances, according to a study of over 40 million consumer checking accounts.

Regulatory bodies suspect that part of the huge amount of overdraft charged filed every year may have to do with confusing overdraft protection disclosure. In August 2017, the Consumer Financial Protection Bureau (CFPB) revealed their new “Know Before You Owe” prototypes to help create a trend of transparency in overdraft protection disclosure requirements.

“Our study shows that financially vulnerable consumers who opt in to overdraft risk incurring a rash of fees when using their debit card or an ATM,” said then-CFPB Director Richard Cordray. “Our new Know Before You Owe overdraft disclosure prototypes are designed to help consumers better understand the consequences of the opt-in decision.”

The “Know Before You Owe” prototypes are one-page model forms designed to streamline the information that banks provide. CFPB hopes that these models will allow consumers to better understand overdraft protection disclosure information, so they can make more informed financial choices. CFPB also hopes that “Know Before You Know” prototypes can help banks streamline their overdraft protection disclosure process.

“These updated prototypes, if adopted, could also make it easier to provide customers with the disclosure form. The CFPB would make any new Know Before You Owe model overdraft form available on its website. Institutions would be able to plug their specific program information into the online form and then quickly download it for free,” the CFPB release states. “This new approach could make it seamless for banks and credit unions to use a new model from within their existing compliance systems, and easier to update their disclosures following future overdraft program changes.”

Understanding overdraft protection disclosure information can help consumers make an informed choice and potentially avoid hundreds of dollars in fees every year. However, if you have already been charged unfair overdraft fees or been subject to deceptive practices, such as the reordering of transactions, you may be eligible for legal action. An overdraft fee lawsuit could help recover compensation for fees and damages for potential violation of consumer protection laws.