rssAttacking Banks on Overdraft Fees
Thursday, August 20, 2009 at 10:34 am
- 8 Comments
Even as some of Congress’ recently enacted credit card reforms go into effect today, a New York Times editorial reminds Washington that the banks are still cheating customers with overdraft fees charged to debit card users. These fees, which average $27 a pop, are slapped on consumers when purchases exceed account balances, regardless of how much the purchase is for. The banks call it a protective service, but consumer advocates and many Democrats say it’s evolved into a profit engine inviting abuse, particularly because most customers are automatically enrolled in the service, and aren’t warned at the sales counter that the $3 latte they’re about to buy is going to cost them $30 instead.
Rep. Carolyn Maloney (D-N.Y.) has a bill that would require banks to make some of these disclosures, but with health reform and climate legislation certain to consume the rest of the year in Congress, The Times is urging federal regulators to take these steps instead:
First, banks must be barred from automatically enrolling customers in overdraft programs. This must be a service that customers opt in to — and only after they are provided full information about the fees and the penalties they will incur. These disclosure statements must meet the same rules laid out in truth-in-lending laws, since overdraft charges are essentially short-term loans.
Banks must also be required to warn customers in real time when a debit card charge will overdraw their accounts — and what fees they will incur if they still decide to proceed with the purchase.
This will require new technology. But there is almost no chance that the banks will invest in it unless they are legally required to do so.
“Until that happens, buyers beware,” The Times warns. “That cup of coffee may be even more expensive than you realize.”
8 Comments
Comment posted August 20, 2009 @ 7:50 pm
Why should the government interfere with my reaming? Where's the profit in that? I enjoy being a victim and demand the right to be robbed, poisoned, abused, pilfered, and molested by corporations whose interest in me is solely predatory and financial. Why, if the government started prosecuting criminals where would this country be?
Oops, too much fox news at the pizza place today.
Pingback posted August 20, 2009 @ 9:31 pm
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Comment posted August 21, 2009 @ 10:25 pm
If you've been hit by an overdraft, visit your bank and complain to the manager! Demand that they remove the overdraft. Support efforts such as these to build legislation against ILLEGAL overdraft profits.
3 500% interest on an non consensual loan is daylight robbery! Banks should not be making a $38 billion dollar profit in FEES on the poorest 10% of their customers who did not elect to be a part of this service.
If I wanted a credit card, I would apply for one. STOP TREATING MY DEBIT CARD LIKE A CREDIT CARD. People should be allowed to OPT-IN or OPT-OUT of overdraft protection. Instead, there is no choice. This should DEFINITELY be against the law!
Comment posted August 25, 2009 @ 7:55 pm
The State of Washington and this paper have challenged the fees charged on short-term loans, but yet are content to require banks to “inform their customers” of overdraft programs.
At an average $27 fee on an average $36 overdraft, bank customers are paying 75 cents on the dollar for their bank loan with a term that lasts only a few days.
At a $15 fee per $100 borrowed, payday customers are paying only 15 cents on the dollar for their two-week loan.
Who's offering the better deal for Washington consumers?
Comment posted August 28, 2009 @ 6:52 pm
This is why we have to be more supportive of cash advance legislation. If consumers are running low on funds, they should have responsible and PROACTIVE solutions in order to bridge the gap between pay periods. Despite receiving heavy and, in my opinion, unwarranted criticism, payday loan lenders are actually working towards giving people choices, rather than being stuck with overdraft fee after overdraft fee.
Comment posted September 4, 2009 @ 7:21 pm
CFSA, the national trade association that represents payday lenders, has made significant changes to their Best Practices, including: displaying fees in large font on posters in all store locations and on their web sites; offering payday loan customers the option of an Extended Payment Plan if they cannot repay their loan when due; placing a “Customer Notice” on all CFSA member-company advertising and marketing materials; banning advertising that promotes the payday advance service for frivolous purposes; requiring CFSA members to prominently display the CFSA seal to help customers identify responsible providers that adhere to these and other CFSA Best Practices. If pay day lenders that loan only a few hundred dollars are held to these standards, shouldn't banks?
Comment posted September 5, 2009 @ 5:16 am
Check out http://www.obamamortgagerelief.org/ . There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 – to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.
Comment posted September 16, 2009 @ 3:59 pm
What do you want Applebees to do when the meal has been eaten and the customer presents his/her debit card for payment and the transaction is denied? Have the customer come to the kitchen and wash dishes to pay for the meal? Banks and credit unions routinely waive 5%-10% of overdraft fees for these types of situations…otherwise move your account to a bank that will. Consumers have numerous ways to check their balances in thier account and they are too lazy to do so. Voice Response, on-line banking, phone call to the bank, and balances can be obtained from your cell phone are just a few ways for consumers to check their balance. According to a Federal Reserve study only 12% of the people in the US balance their checkbook. The Federal Government should require this before they regulate banks paying an overdrawn item. When an item is paid into overdraft the bank is doing the customer a favor. This eliminates the hassle and embarrassment and in the case of a check the returned check charge from the merchant. If consumers can spend all of their money gambling (leagally) then they can balance their checkbook to ensure that yhey have enough money BEFORE they buy the latte!!!
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