With the publication of Supervisor of Banks Yoav Lehman’s directive that, within a year, the banks must eliminate overdrafts on current accounts that exceed the amount arranged with the customer, many customers are expected to ask the banks to increase their approved overdraft limits to the level of the actual amount by which their accounts are overdrawn.
A “Globes” inquiry shows that, in some cases, banks charge a high fee, sometimes over NIS 100, for raising an overdraft limit. Bank Hapoalim charges NIS 38-140 in credit and collateral handling fees, also called document preparation fees. The amount of the fee depends on the sum by which customers wish to raise their overdraft limits.
Customers seeking to increase their credit limits by up to 3,000 pay a NIS 38 fee; customers seeking to increase their limits by NIS 3,001-7,500 pay NIS 86; and customers seeking to increase their limits by NIS 7,501-15,000 pay NIS 140.
In addition, Bank Hapoalim customers must pay stamp duty of 0.4% of the additional credit. Customers seeking to increase their credit limits by NIS 10,000 will therefore pay NIS 40 stamp duty, in addition to their NIS 140 fee.
Bank Hapoalim said, “Raising the overdraft limit on a current account is a contractual agreement for providing or increasing credit. By law, contracts must be stamped, and the stamp duty is paid to the state. Handling fees are charged by the bank for the expenses involved in creating or increasing a credit line, including preparation of the legal documents required for the transaction. These charges are at a reasonable and normal rate.” The bank added that if the bank unilaterally raises the limit, the customer pays no fee.
Bank Leumi, United Mizrahi Bank, and The First International Bank of Israel, other large banks that compete with Bank Hapoalim, do not charge for raising credit limits, nor do they collect stamp duty for it. These banks said that they charged stamp duty and document preparation fees only if a loan was being provided, not for altering an overdraft arrangement.
Israel Discount Bank charges a fee for raising overdraft limits only for customers who do not belong to certain groups. Such groups include wage earners, students, young people, soldiers, pensioners, and VIPs. Discount Bank said only a minority of its customers were charged the fee, which amounts to NIS 45-300, depending upon the sum by which the limit is raised.
The large Israeli banks will reportedly formulate credit plans for private customers exceeding their overdraft limits. The banks are currently studying Lehman’s draft directive, and will later formulate various alternatives enabling customers to eliminate excess overdrafts. Customers will be referred to the alternative most suitable to them.
The large banks said yesterday that, in common with their differential fee plans, the new credit plans would be creative, in order to match as closely as possible the needs of each customer and the risk he or she represents.
Published by Globes [online] - www.globes.co.il - on Wednesday, September 08, 2004