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January 29, 2007
Overdraft Fee Legislation in 2007?
U.S. House Financial Services Committee member Carolyn Maloney (D-NY) announced her plans to reintroduce Overdraft Fee legislation. Her principal focus is increased disclosure and consumer choice to opt out of overdraft fees.
The Center for Responsible Lending issued a Report last week indicating that debit card overdrafts generate a sizeable percentage of overdraft fees.
Link to Maloney Press Release: http://maloney.house.gov/index.php?option=content&task=view&id=1273&Itemid=61
Link to Center for Responsible Lending Report: http://www.responsiblelending.org/issues/overdraft/reports/page.jsp?itemID=31469347
(ag) Jan. 29, 2007, in Deposit Regulation/Congress
January 29, 2007 in Congress, Deposit Regulation | Permalink
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Hello,
I support robust reform and strong legislation to reign in the practices of predatory lending, and frankly predatory banking, which deliberately sets "fee traps" for customers.
This "Enronification" of our economy and culture has to be stopped. The money ripoff is bad enough, but more than that it's the outrage that people have to be constantly on the defensive as it's become accepted that large corporations can and will rip people off and get away with it. That immorality and crooked dealings are the norm, that's the real outrage.
It's completely immoral and corrosive when too many people are in the business of legal crime, or in the case of customer service professional stonewallers, making a living doing something their ashamed of.
Since every bank is doing it, and hiding their practices, there really aren't any effective market forces or options for educated consumers to help end this truly immoral practice of basically legalized robbery.
My wife and I were recently gouged for almost $500 in fees for around 15 overages on our Well Fargo joint account debit card, because for once we forgot to check it. Many overdrafts were purchases as small as $6, but incurring a punative fee of $34 each. A 566% fee! Adding insult to injury, WF even charged "consecutive overdraft" fees, i.e. fees for fees! A bonus fee so to speak. Best of all, when we realized we were overdrawn and deposited a check, Wells Fargo held the check for four days, when they usually clear in one day, with the excuse they wanted to make sure the funds were available. During which time additional automatic bill payments were incurred, with more overage fees.
We're both educated professionals who do try and read consumer contracts, but in no way were we aware of this ridiculous practice until now. Certainly we would have preferred to an opt-out of any overages when we opened the account, and for the transaction to be denied at the cashier or given the option to opt-out then. In no way did we want or need to apply for this tiny "loan" of under $200 total, with such outrageous fees totaling almost $500, for only two weeks.
Clearly banks know consumers don't want such absurd fees and would prefer to opt out, and that is exactly why they're not offering that option!
Of course the workers at Wells Fargo "customer service" were all just "doing their job" and utterly unhelpful. Typical of the Nuremberg psychology CS people live with.
All around, truly an absurd moral outrage and sign of the times.
Please do something to reform these grotesque predatory practices. The penalty is completely disproportionate, and it's clear to be I stumbled into a "fee trap" of the type becoming all too common, and never had an option to opt out of. The problem is rampant from what I've seen and read in the news.
Posted by: Ned | Feb 28, 2007 1:17:35 AM
I strongly support this reform as the banks are charging userus amounts for lending money to customers for small debit card purchases. The lack of transparity regarding how your banking institution submits and orders these charges is unfair. Often, banks will offer curtesy overdraft fees on debit purchase, denying customers the right to opt out, while denying them overdraft credit. This only compounds the problems of working class families trying to stay afloat. Great legislation.
Posted by: Joy Freeman-Coulbary | Mar 14, 2007 4:49:35 PM
I would have an enormous amount of respect for any representative willing to take on the banking corporations on this issue.
Surely most consumers would rather be denied at the cashier, rather than pay a fee for overdraft. At a minimum, there should be a law requiring banks to allow you to opt-out.
What's most concerning is that nobody has done anything about this yet... Clearly this is an unfair practice of questionable legality at the expense of consumers.
Hat's off to you.
Thanks,
-Ron
Posted by: Ron M. | Aug 1, 2007 11:42:09 AM
I will admit that there are some institutions who have taken overdrafts a little too far, however, banks overdraft protection is a voluntary fee. All customers should know when they have spent more money than they have in their account. No fees are associated with having the benefit of the bank covering the item. It just kills me that people want to legislate out any repercussions for lack of personal responsibility. If you balance your check book and track your deposits you would not pay any fees associated with overdrawing your account.
Please remember that banking is a "for profit business". Shareholders do not invest in banks that operate at a break even or a loss.
I suggest that consumers take the time to find an institution that has an overdraft product that fits your needs. Not all banks operate their services in the same fashion. You always have the option to not use their debit card as well!
Posted by: Curtis | Oct 1, 2007 4:21:55 PM
Curtis - You work for a bank don't you??? Be honest now!
I am an overdrafter, let me get that out of the way. I watch my balances and my checkbook just fine, however, unforeseen things happen. A few weeks ago there was a glitch in payroll and about 2000 people in my company didn't get paid. That had nothing to do with me. A couple of purchases and an automatic billpay hit and bang $35 x 5 = $175. And four of those were under $10. I also notice that it is bank policy, at every bank, to charge the largest charge first so that as many small charges as can overdraft, maximizing their profit. On the above example If the small ones had hit before the big billpay, I would have only had to pay $35 for one overdraft and been done with it. I might as well have been mugged on the street, it would have been more fun.
These are not administrative, finance or convenience fees. They are just a way that banks are allowed to steal from the public. And I did "take the time to find an institution that has an overdraft product that fits your needs", it doesn't exist. My bank charges just as much to transfer emergency funds from a savings, so that's useless. They do have overdraft protection, hmmmmmmmm, but no, that's a form of credit and they won't give me credit because I've overdrafted, how convenient.
So basically they say that we see that you are having a problem, but we don't want to help you because if we leave you as you are we can continue to steal as much as we want from you. And there is nothing you can do about it. So yeah, I know that "banking is a "for profit business"".
Posted by: Alex | Oct 11, 2007 12:17:16 PM
How about a class action suit against these banks!!!??? There has to be something unethical, or to say the least, illegal about these practices. These banks prey on consumers and nothing gets done about it because, yeah they are corporations and we are the "little ones" they can just munch on. I, just today, closed my Sovereign Bank account due to massive overdraft fees on December 24th. They like to play with semantics: i.e. pending, posted, etc... when in fact, in this day and age, electronic transmition rules.
Posted by: Claudine Lima | Dec 31, 2007 3:50:04 PM
I would like to respond to Ron, who said:
"I will admit that there are some institutions who have taken overdrafts a little too far, however, banks overdraft protection is a voluntary fee. All customers should know when they have spent more money than they have in their account. No fees are associated with having the benefit of the bank covering the item. It just kills me that people want to legislate out any repercussions for lack of personal responsibility. If you balance your check book and track your deposits you would not pay any fees associated with overdrawing your account."
People who are this blindsided by the "righteousness" of the system really bother me. I can guarantee you that Mr. "Ron M." here has never had less than $10 (although the figure is more likely $50 or $100) in his bank account.
As for me, my husband and I live paycheck by paycheck to support our family. We barely cut it, and any unexpected fees or events shake us pretty deeply. Imagine my surprise when the bank started charging me $7.50 a month for a "service fee" after signing up for a free checking account! This $7.50 caused a transaction to bounce, and resulted in twp $35 overdraft charges (I'd made two purchases--one for $3.50 and one for $2.50).
Although the bank "investigated" the $7.50 charge, it took them several months before they reached a "verdict." In the meantime, I was being charged $7.50 each month! And, although in the end I was reimbursed for those charges, I was not reimbursed for the overdrafts that I would never have recieved if it hadn't been for the service fee I didn't deserve.
I've had similar issues with banks charging "services fees" or "customer support call fees" that I was not aware could be assessed. It is often these surprise "fees" that send low income families swirling into the depths of overdraft-dom.
So, Mr. Ron, before you go blaming us for being irresponsible with our money, why don't you realize what you said? Yes, banking is a for-profit business. And like any for-profit business, they blur the line of ethics in order to generate those profits--often at the expense of unsuspecting, undeserving individuals.
Posted by: Nicole | Jan 26, 2008 1:50:55 AM
As I write this I have just been informed by my bank that i am over $900 overdrawn, panicked and puzzled i opened my web browser to my online banking. Yesterday 12 overdrafts were charged to my account. My paycheck was deposited in the ATM after 6th on the 8th due to traffic and limited locations of my bank (I have only one, its by my house. My work cuts checks at 5pm, bank closes at 6pm, 30 min drive WITHOUT traffic). SO today Saturday the 9th my online banking shows that I deposited my paycheck on the 11th.....2 days from now. They are however open and continuing to hit me with more overdrafts as we speak. I am going up the to talk to them. This is the THIRD time this year my entire paycheck has been wiped out by overdrafts due to me being caught between my work's payroll practice's and my bank's limits locations and inflexibility.
I know it sounds like a bunch of personal problems right? Well yes and no. If I wasn't getting mugged for 12 overdrafts even though they have my paycheck in their hands today, they can pretend it doesn't exist because it arrived after 6pm. So basically they can find time over the weekend to process other payments and charges, but not my deposits.
Please work on reform.
Thank you
Posted by: Cabe Booth | Feb 9, 2008 11:47:19 AM
I wholeheartedly agree with legislation. I understand that we should keep close eye on our account, but the fees that they charge are excessive.
Outraged is the only word to describe my feelings.
Something else that will also make you outright angry is that customers who are repeated overdrafters are considered good customers because they bring in so much money for the bank. I worked as a teller in college and I couldn't believe the names on our good customer list until I was told it was because they brought so much money in from overdrafts. Of course they're not going to change it. (But you can apply for a credit card and that will be your overdraft protection). What they don't tell you is that very few people actually qualify for the credit card.
I went overdraft $1.25 for a $2.00 charge. Because of that overdraft, and the ensuing $34 fee, I had three others overdraft. The total of those other charges? $18.41. I paid $136 to borrow $19.66. But it was all done out of "courtesy" so that we wouldn't be declined at the store. Well, please decline me!!!!!!!!!!!!!!!!!!!!
While congress is calling in the oil execs because they are gouging us consumers, they are totaling neglecting the banking and credit card industry who is much worse. At least I get something for my $4.00 in gas and no one is forcing me to pay it: I can find other means of transportation. But when banks charge these over inflated fees and take out the money from my account, my phone bill doesn't get paid, I don't buy groceries for my 5, 3, and 1 year old and we end up charging our power bill so it doesn't get shut off.
I'd like to know what congress is going to do about it. They say they're for the little guy. Well prove it! Get the banks out of their pockets and do something about it.
Posted by: Michelle | Jun 3, 2008 12:49:29 PM
what really gets me is how you can go to bed at with a positve balence in your checking account have a payroll deposit made and get up in the morning to an overdraft for UAF which in the banks terms is unavailible funds and then recieve a another fee for 35 for an nsf. resulting in your account that reads something like this availible funds 1939.43 current balence -74.12 which includes $70 IN MOB fees because that's what we have allowed them to become.
Posted by: chas | Jul 16, 2008 8:01:43 AM
What I'm upset about it in the past, only if your LEDGER balance was negative, did you get charged a fee. Now, if your available balance is negative, they charge a NSF fee too. Sometimes, cards get double swiped, but since only one receipt is signed, that's all the money that comes out of the account. Since the other "hold" will jsut go away, it never used to be an issue to continue to use your account, knowing full well you have the money, it was just erroneously put on hold. Now, you can't even do that anymore. To me, that's unscrupulous and I hope something gets done about it. Hey, I'll eat the fees that send my ledger balance into a negative, but not the fess from holds and preauths.
Posted by: Michelle | Sep 5, 2008 4:57:30 PM
Overdraft, late fees and overlimit fees with credit card companies and banks are as much responsible for our melt down in mortgage defaults as anything. If you're late on your mtg by 10 days you may be charged a few dollars but it dosen't compare to what you are charged if you're late or overlimit on a $500 credit card or a few dollars overdrafted on your checking account. Borrowers who are trying to juggle the charges between paying the mortgage and suffering the excessive charges of overdraft of other fees may choose to pay credit cards first. The excessive fees are like a knock out punch for people who struggle to make ends meet. Overdraft fees should never exceed the dollar amount of the overdraft. Mistakes, circumstances and errors should not plunge people into such a deep well.
Posted by: Mike | Oct 9, 2008 11:11:46 PM
