Senate to mandate interest free loans?
Democrats Target Bank Overdraft Charges
A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.
Banks struggling to survive have become increasingly reliant on the fees, which could total $38.5 billion this year.
But congressional Democrats, who pushed through new restrictions on credit cards this spring, now are promising a crackdown on overdraft fees, using words like “criminal” and “rip-off” to describe the practice of letting people overspend and then charging them fees without warning. Most overdrafts are now incurred on debit card transactions.
The result of this will be either interest free loans or not covering written checks. And the fees for bounced checks are usually more because, in addition to a bank fee, the place you bounce a check to probably charges a fee for that.
September 22nd, 2009 at 9:39 am
“Senate to mandate interest free loans?”
There are two ways to run debit cards, allowing overdrafts at purchase or not. If they do, then you can spend more than you have and if the money isn’t there when the debit clears, the bank gets to hit you with a fee. If they don’t then the bank checks your account balance and only allows the transaction if you actually have the money.
Most banks allow overdrafts by default because the fees make money and because customers don’t like to be embarrassed when their debit cards are rejected. The latter is great because it gives them an excuse to never tell their customers of an overdraft so they almost always get to collect the fee. The government thinks it ought to work the other way, where the bank doesn’t let you spend money it already knows you don’t have. Of course without government intervention you can tell your bank how you want your account to work and they generally have to do it that way.
September 22nd, 2009 at 10:38 am
Shouldn’t the government take their own advice and not spend money they don’t have?
September 22nd, 2009 at 1:55 pm
Except for when banks game the system – like my bank (well, former bank) which hit us up for an overdraft fee not when we were overdrafted but when we actually fell below the overdraft fee rate – and they simply moved money over (which of course wasn’t sufficient to cover the over draft fee, resulting in . . . you guess ed it another overdraft fee). Had I not run out of money in our savings account, it would have gone on. As it was, we got hit with almost a $5,000 charge for something that we should never have been charged with. And it took drafting a complaint and finally faxing it to the banks general counsel and cc’ing a friend on the Senate Banking Committee along with the cover note that I was on the way to sue their ass in court (for a RICO violation at that) to get the bank to back off. I’d hate to see what happens to people who don’t have the resources to fight back.
Oh yeah, and then there is Home Depot who used similar games to charge me (or attempt to charge me) 1095.11% interest on $2 of a bill that they claimed wasn’t paid on time when it was their own book keeping error and I had the canceled checks to prove it. That required a drafting a federal complaint and threatening them with that and an investigation by Republican on the Senate Banking Committee too to get Citibank to back off on the charge. And it was only after they did some checking and found out I was serious that they agreed to waive the illegal charge.
While I agree with you in principle, I think the banking and finance industry has dug its own grave on this and a host of other issues.
Fuck ’em.
If it were me – I’d give em a choice . . . . willingly submit your CEOs to mandatory 10 year prison terms or face these severe restrictions on your business model. Somedays, i think they should be hit with both. And I’m a damn libertarian.
September 22nd, 2009 at 1:57 pm
I don’t have the documents on the Bank of America shit with me. But if anyone doesn’t believe me about the Home Depot crap – I can scan the bill and post it.
That happened a couple of weeks ago.
September 22nd, 2009 at 6:00 pm
I have a friend who is – to be kind – not the best financial manager in town. Wells Fargo was eating her alive with overdraft fees from her debit card.
They refused to simply not give her money when she didn’t have the money. Instead, it was overdraft fees, one after another.
I got her into another bank (a small local bank) and out of Wells Fargo. But hey, them dudes aren’t the guys on the stagecoach in their ads. They’re the vulture circling overhead.
September 22nd, 2009 at 9:43 pm
NBC Nightly News has been doing a series on bank overdraft charges lately. It’s a common problem.
I had a problem once trying to pay off a credit card bill. I paid the total balance due. They sent me a bill for the finance charges that were racked up before I sent the total balance in. Okay, so I paid that bill too. The next month they sent me another bill — which was the finance charge on the unpaid finance charge from the previous month. This went on for a few months with me trying to battle them on this. It was just crazy.
September 22nd, 2009 at 10:00 pm
Like I said fuck them all.
Usary is already illegal. But they managed to game the system – with the help of Dodd and Joe Biden – to legalize it.
If they didn’t want this brought on them, they would have self regulated and taken upon themselves to rid the industry of the bad actors. Instead, they made it the SOP.
Fuck them all, throw every last one in jail or simply let the wolves eat them. I don’t care. We can start over – plenty of smart and ethical people who would be willing to take their place.
September 22nd, 2009 at 10:01 pm
Agree with above, it’s not just covering rubber checks, Its those goram debit cards. If there’s anyway around it kids, don’t do debit. Get yourselves a $1000 secured credit card.
Just automatic signing people up with overdraft is like offering them a line of credit without ever runing their FICA score.
The other game they do is to rearrange the order of debits and checks to sock you for the most fees possible.
September 23rd, 2009 at 5:47 am
Banks have reordered transactions to maximize overdraft fees, and post transactions when they do to rig the game in favor of allowing overdrafts to occur more easily.
I agree, if they didn’t want this legislation to inevitably happen, they should have thought about that before they made this kind of ursory standard practice.