I have noticed that when a Bank charges a fee for accessing and Overdraft Line of Credit, often called a "Transfer Fee," the amount is generally charged to the deposit account. Is it permissible for a Bank to instead add the "transfer fee" to the amount of extended credit on the ODLOC and receive interest on this amount? I could not find any Regulatory guidance that spoke to the situation one way or the other. From an operational perspective, for those banks that do charge the transfer fee to the deposit account, then wouldn't this basically just result in another Overdraft because the account is already in a negative balance, or is it not really considered an Overdraft because it is an internal charge? In that case do you just leave a negative balance in the deposit account because of the fee?
I also see that Banks often draw on the line in certain increments, such that if the negative balance is $10, for instance, the minimum draw on the Line is set to $50, such as with this US Bank product -
https://www.usbank.com/bank-accounts/che...rotection.html. I guess the extra $40 that you would be back in the positive would be enough to cover the Transfer Fee, but let's say the negative is $47 and the $50 increment would only leave the account with a $3 positive balance and then a $5 Transfer fee would create another Overdraft. I could see the potential for a lot of abusive practices to the consumer either way, i.e. charging interest on the Transfer Fee, or charging the Transfer Fee to the deposit account and then having a new negative balance result and doing another line draw, transfer fee, and on and on.