WASHINGTON -- Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced Thursday by the Federal Reserve.

The rule responds to complaints from consumer groups, members of Congress and other regulators that the overdraft fees are unfair because many people assume they can't spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.

For small purchases, such as a cup of coffee, the penalty can far exceed the actual cost of the transaction.

Under the Fed's new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don't "opt in," any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.

Many consumers do want checks and regular electronic bill payments to be covered in the event of an overdraft, Fed officials said. As a result, those transactions aren't covered by the rule.

Banks earn as much as $25 billion to $38 billion annually from overdraft fees, Fed officials said, but that total includes check overdrafts.

Ashley Richardson, 26, said she has been hit with fees of $37.50 by U.S. Bank for purchases of as little as $2 or $3 that overdrew her account. The Los Angeles resident said she's asked to opt-out of the overdraft program without success.

"I'm a very unhappy customer," she said.

Steve Dale, a U.S. Bank spokesman, said the bank wouldn't comment on specific customer complaints. But the Minneapolis-based bank plans to eliminate fees if an account is overdrawn by less than $10 and will allow customers to opt out of the overdraft program. Those changes, announced in late September, will go into effect Jan. 1, he said.

Other larger banks, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. also have said they plan to reform their practices after coming under fire for the fees.

But consumer groups and other regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair, said new rules were still necessary to ensure smaller banks followed suit.

Many lawmakers have criticized the Fed for failing to provide sufficient consumer protection in the past, a defect they say contributed to last year's financial crisis. Sen. Christopher J. Dodd, D-Conn., on Tuesday introduced a bill that would strip the Fed of its consumer oversight.

Dodd also proposed legislation last month that would have imposed limits similar to the Fed's on the banks' ability to charge overdraft fees.

Dodd called the Fed rule a "long-overdue announcement" and said the government should go even farther.

"We still need to stop the excessive fees, repeated charges, lax notification and processing manipulation that have become standard in these so-called overdraft protection programs," he said.

The American Bankers Association, meanwhile, said the rule addresses consumers' main concerns about overdraft fees.