Opt Out of Predatory Overdraft Fees

Financial Justice

chasesucksNew Orleans Finally Congress does the right thing, or at least some of the right things, and passes credit reform legislation, and now we have the spectacle of the federally bailed out banks desperately trying to hoodwink citizen customers into volunteering to allow their pockets to be picked. Banks have been making $40 billion in rip off fees by charging overdraft fees. The new law requires that customers have to volunteer for this so-called “overdraft protection,’ rather than being put into the program by default, so now we have the bums’ rush from the banks to try to keep the hustle alive.

Once upon a time there were just “bounced check” fees. One of the first thing all of us learned when we got a checking account is that we paid the piper if we didn’t either balance our checkbooks (which I didn’t) or at least keep up closely with our cash flow (which I did). The penalty for a mistake was getting an NSF (non-sufficient funds) notice in the mail, having to make good on some payments, having a fee deducted, and living through the embarrassment.

That was then, but not now. The quaint “bounced fee” world only accounts for $6 billion of the take for banks when we overextend past the money in our accounts. And, although I’ve got some beefs here, I’ve got to say that pretty much, “fair is fair.”

The banks found a profitable niche of business though in figuring out how to essentially make high interest predatory loans of our mistakes and charge exorbitant and unconscionable fees on top of it, largely by exploiting the new technological ease of ATM’s, debit cards, and online bill payment. According to a chart in the New York Times complied from Moebs Services, banks make almost $12 billion from check and online bill payment overdraft fees and over $20 billion from debit and ATM card overdraft fees which is their big kill.

I’m feeling smug here, because I feel like I have been rewarded for being a slow adopter since I’m old school and still won’t allow automatic bill payment from my account. My school was “stretch, float, and burn,” which allowed some management of meager cash flow against the hordes of bill collectors. Even paying more of my bills in a timely fashion as I got older, my view remained: you just never know! And, the notion of not being able to get them out of my account once they were “in,” was also frightening to a penny pinching Luddite.

I get the feeling that these bloodsucking banks aren’t quite being transparent with their customers. When reportedly Bank of America says it won’t charge a fee if the overdraft is less than $10 (Chase says $5) and will only hit the customer with a maximum of 4 overdraft fees per day (Chase says 3 per day!), I’m confused, since they should be able just to say “declined” when you hit the cards, right? I can guarantee you that’s what most of them do on credit cards! Given the way overdraft fees have soared, someone who went over the line could be hit with $100 or $200 in overdraft payments, which when the money is at low water could be the freaking reason the charges are bouncing in the first place.

The banks are promoting the fact that customers should continue to be sheep for the slaughter by opting in for “emergencies,” but from what I can tell, if citizens have the good sense to NOT opt in, then dollars to donuts, the banks will come up with a premium “emergency” product that will meet that niche just fine for whoever wants a AAA bank plan, though I don’t think it will make then $20 or $30 Billion.

Just say no!