Overdraft Fees

rimrocker · Jul 12, 2007

Every time I have any contact with any of my card people, they are trying to push this junk on me and often try to slip it in by saying it real fast or acting like it's just assumed I would want it. That the fees charged are now larger than the overdrafts provided should tell us something.

Overdraft fees huge but hushed
Consumers often are unaware of what they are paying to cover checking account shortfalls, critics say.
By Kathy M. Kristof and Andrea Chang, Times Staff Writers
July 12, 2007
http://www.latimes.com/business/la-...coll=la-headlines-business&ctrack=1&cset=true

Consumers are paying huge fees on short-term loans that cover them when they overdraw their checking accounts, under programs that banks and credit unions often enroll customers in without their knowledge, a new study says.

Fees to cover overdrafts are taking advantage of Americans' rising use of debit cards to make even small purchases, the Center for Responsible Lending said in the study released on Wednesday. Debit cards typically draw directly on consumers' checking accounts.

Consumers may be caught unaware that they are overdrawing their accounts, because they may assume that debit transactions simply wouldn't go through if their accounts lacked sufficient funds, the center said.

The study, released hours before a House hearing on a bill that would require clear disclosure of overdraft charges, estimated that the programs cost consumers $17.5 billion in fees last year, up sharply from $10.3 billion two years earlier.

The average charge for an overdraft loan: $34.

The fees now exceed the $15.8 billion a year that banks temporarily lend customers via the overdraft programs, according to CRL, a nonprofit consumer advocacy group.

"At many banks and credit unions, customers are enrolled in abusive overdraft loan systems by default when they open checking accounts, often without their express consent," the study said.

At the hearing held by a subcommittee of the House Financial Services Committee, Rep. Carolyn B. Maloney (D-N.Y.) said the "now dominant practice of overdraft charges is anything but fair and transparent" for consumers.

But bankers who testified at the hearing said it wasn't difficult for customers to avoid getting dinged.

"Knowing how much is in their accounts is certainly something that consumers are in control of," said John Hall, a spokesman for the American Bankers Assn. "They know what checks they have written, the automatic payments they have authorized. Overdraft fees can clearly be avoided."

The increasing automation of overdraft programs has allowed a larger swath of Americans to receive an arguably valuable service, bankers said. They also said that although consumers might not have to sign a specific agreement acknowledging that they have the service, they are told of the services their checking accounts provide, and what they cost, when their accounts are opened.

Elizabeth Warren, a Harvard professor who has written extensively on "tricks and traps" in financial-services products, said the automatic overdraft plans were "about exploiting consumer weakness."

"Many of us do not keep our checking accounts balanced to the penny every time. Many of us do not account for the number of days that the bank will keep a hold on a deposit. We can make a 50 cent mistake and be charged $30 for it."

Logan Scott, a data security worker in Cleveland, said he was hit by four overdraft fees in one day. Thinking he had $11 in his account, he bought several small items, including $4 in sodas from a convenience store. That triggered a total of $140 in fees, he said.

When he complained to the bank, he said his banker told him to keep better track of his money.

The Center for Responsible Lending's study said fees can be triggered by the order in which banks choose to clear checks and other charges to customers' accounts. By clearing larger transactions first, a bank can push an account into the red faster than if it first cleared smaller transactions, the study said.

It said banks "reserve the right to [clear] in the order they choose, and not necessarily in the order in which payments are made."

Maloney said her bill would require banks to warn consumers at a point of purchase that a debit card transaction would trigger an overdraft fee, much as they warn a consumer who is about to be charged to use an automated teller machine. That would allow a consumer to cancel the purchase and avoid a fee.

But Nessa Feddis, senior federal counsel for the American Bankers Assn., said that warning customers when a debit transaction would trigger an overdraft would be "cost-prohibitive" for banks.

There are ways to set up your accounts to reduce fees, bankers said. Consumers can specifically sign up for an overdraft protection service that automatically advances funds from a linked savings account, credit card or other line of credit when a customer has insufficient funds. The fee for this service can be as low as $10 per money transfer.

By contrast, Bank of America would normally charge $20 per overdraft on the first day and $35 per item each additional day the overdraft isn't covered by added funds, said Diana Wagner, a spokeswoman.

At Wells Fargo & Co., customers also have the option of enrolling in the bank's overdraft protection service, which offers significantly lower fees for overdraft transactions.

Without linking to another account, a Wells Fargo customer in California with insufficient funds in his or her checking account would be charged $23 per item on the first occasion and $34 per item each time thereafter, based on the number of overdrafts in the preceding 12-month period, said spokeswoman Mary Trigg.
Click to expand...

deepblue · Jul 12, 2007

Don't spend the money you do not own, that will solve a lot of problems.

DonkeyMagic · Jul 12, 2007

deepblue said:

Don't spend the money you do not own, that will solve a lot of problems.
Click to expand...

you're a financial genius. "don't spend more than you have"...who would have thought?

Rocket River · Jul 12, 2007

It said banks "reserve the right to [clear] in the order they choose, and not necessarily in the order in which payments are made."

That is the problem there
They can hold them for the opportune time

Rocket River

rimrocker · Jul 12, 2007

Rocket River said:

It said banks "reserve the right to [clear] in the order they choose, and not necessarily in the order in which payments are made."

That is the problem there
They can hold them for the opportune time

Rocket River
Click to expand...

And they almost always clear the withdrawals before the deposits.

ima_drummer2k · Jul 12, 2007

"Knowing how much is in their accounts is certainly something that consumers are in control of," said John Hall, a spokesman for the American Bankers Assn. "They know what checks they have written, the automatic payments they have authorized. Overdraft fees can clearly be avoided."
Click to expand...

That's kind of like saying "if you bounce a check, we'll murder your entire family. There's nothing wrong with this policy because you shouldn't be bouncing checks to begin with."

The same kind of logic that says we shouldn't care when a prostitute gets raped and murdered. After all, she shouldn't have been a prostitute in the first place.

insane man · Jul 12, 2007

DonkeyMagic said:

you're a financial genius. "don't spend more than you have"...who would have thought?
Click to expand...

certainly your president never thought about that.

thadeus · Jul 12, 2007

I've noticed this while looking at my bills recently (not the overdraft fee - thankfully haven't had one of those since the early days of my first checking account).

The punitive charges for 'late payments' are creeping up and the window of time between a payment being on time and being late is gradually getting smaller.

This is a very, very bad thing - because competition isn't going to limit the extent of this change (competition that, theoretically necessary for capitalism, barely even exists anymore). Keep in mind - the business of these companies is to MAKE A PROFIT. That's their only reason for existence - if they have free reign to set the punitive costs for late payments, and also unrestricted power to establish what counts as late, what do you think they're going to do with that?

Exactly what they are doing - try to profit from it as much as possible. At a certain point, it will no longer be in their best interest to have ANYONE pay on time - they will be able to make greater profit by delinquent accounts than through normal ones.

pgabriel · Jul 12, 2007

working in banking for a long time, most banks just choose to take the biggest transaction first, and go down. they say the do it because your bigger checks are usually more important, mortgage rent car note, but obviously, if you take the bigger items first, the that depletes the accounts faster, and the more fees can be taken.

also, anyone ever screwed up an account, and started overdrafting on $5 trips to mcdonalds, and get charged $30 knows this is the real issue.

the problem is the check card.

DonkeyMagic · Jul 12, 2007

insane man said:

certainly your president never thought about that.
Click to expand...

wow turning a completely non political topic into one. great.

ps..ive said it a million times. i didnt vote for bush.

same old tired ass gets thrown around over and over. Plus, he's your president too. believe it baby...its true

Forums

Overdraft Fees

rimrocker Member

deepblue Member

DonkeyMagic Member
Supporting Member

Rocket River Member

rimrocker Member

ima_drummer2k Member

insane man Member

thadeus Member

pgabriel Educated Negro

DonkeyMagic Member
Supporting Member

Share This Page

About ClutchFans

Rockets Content

Support ClutchFans!

Overdraft Fees

rimrocker Member

deepblue Member

DonkeyMagic Member Supporting Member

Rocket River Member

rimrocker Member

ima_drummer2k Member

insane man Member

thadeus Member

pgabriel Educated Negro

DonkeyMagic Member Supporting Member

Share This Page

DonkeyMagic Member
Supporting Member

DonkeyMagic Member
Supporting Member