Don Wright, 65, didn't know he was enrolled in his bank's overdraft protection plan until he overdrew his checking account by 85 cents. The transaction triggered snowballing fees that ultimately added up to more than $120.

Now people like Wright are at the heart of proposed banking rules that would allow customers to avoid overdraft programs that some maintain have become a racket.

"They (banks) say they're covering your transaction as a courtesy," said Wright, a self-employed businessman from Dayton, Ohio. "But they're making a killing. I don't want them to approve a debit when I don't have enough to cover it in my account. This is a complete fraud."

The Federal Reserve, which sets some banking rules, has been weighing new regulations for overdrafts for more than a year. They're giving consumers the ability to comment until the end of March, with the anticipation that they'll come out with final rules by this summer.

The rules are necessary, experts contend, because most banks now automatically enroll checking account customers in overdraft plans -- and some banks won't let them out. Bank of America, for example, doesn't give consumers the option of dropping overdraft protection, a company spokeswoman says. If you have a checking account with the bank, you have it. Period.

And the programs aren't exactly cheap. Banks typically charge between $25 and $35 per overdraft. Many impose additional fees for each day the consumer maintains a negative balance. The fees are equally high whether you're overdrawn by hundreds of dollars, or just a few pennies, like Wright.

That's got consumer groups up in arms.

"These are high-cost loans that cost consumers billions of dollars every year," said Lauren Zeichner Bowne, staff attorney for Consumers Union in San Francisco. "The Federal Reserve Board should protect consumers by stopping the fees unless the consumer makes the choice to opt in to the program."

Bankers counter that overdrafts are easy to avoid. Consumers simply need to keep better track of their account balances, said Nessa Feddis, vice president and senior counsel at the American Bankers Association.

Or, if consumers prefer, they can link a savings account or a credit card to their checking account, ensuring that any overdraft hits the linked account rather than the overdraft program. These programs are also pretty pricey; banks charge a fee of $3 to $5 per overdraft, and also bill any linked credit cards at the cash-advance rate, which can be quite high. Still, unless you let the balance linger on the card, that's generally cheaper than the $35 a pop charged for uncovered overdrafts.

A report by the Center for Responsible Lending said that a number of bank policies make it tough for consumers to keep good track of their balances. As a result, fees for overdrafts have soared to an estimated $7.8 billion annually. Continued...