Banks and credit unions collected nearly $24 billion in overdraft fees last year, an increase of 35 percent from just two years earlier, a new study by the Center for Responsible lending shows.The explosion in overdraft charges has drained the wallet of as many as 51 million Americans whose accounts become overdrawn annually. It is particularly harmful to financially vulnerable families already hit hard by the recession.
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The most common trigger of overdraft fees are small debit card transactions that could easily be denied for no fee. This is how things used to work, and according to a 2008 nationally representative survey, it’s what the large majority of people prefer. [The Center for Responsible Lending]
Taxpayers saved the banking industry, and didn’t ask much in return because the most important thing was to keep the economy solvent. Now that the financial system is in better shape, though, it’s time for the banks to start repaying the trust we put in them. It would be nice to have the banks agree to further reform, but I have a feeling they’re not going to cooperate willingly. Fortunately, we don’t need them to — the Federal government can impose new regulations on the industry.
The Credit Cardholders’ Bill of Rights was a good start, but it’s not enough. The Center for Responsible Lending has a few suggestions for additional regulations that are needed:
- Require that institutions deny debit card purchases and ATM withdrawals, without charge, if the funds aren’t there. As a limited exception, an overdraft fee could be charged if the lender gives the customer a real-time warning and chance to decline.
- Require that overdraft fees bear some relationship to a lender’s cost of covering a shortfall.
- Limit the number of fees that can be charged to a customer during a year before the institution must enroll the customer in a reasonably priced overdraft product, such as a line of credit, if it wants to keep charging for overdrafts.
- Consolidate and streamline existing federal consumer protection authority by housing it in one organization: the proposed Consumer Financial Protection Agency, which would focus solely on what’s in the best interest of consumers.
Comparing last year’s data with data from two years ago does not constitute an accurate assessment of the result of TARP
Apparently Republicans are no longer the party of law and order. Letting a felon host a Republican candidate debate? Someone please tell me we are sending trackers to this for videotape!
http://www.startribune.com/blogs/63881797.html
yeah, thats much worse than a bunch of DFLers taking cute corn dog pictures with a guy that beat his girlfriend up
http://www.dustytrice.com/?p=6381
http://www.minnesotademocratsexposed.com/2009/10/...
The point of the bailout was under Bush as it should have been under Obama was to dappen the rapid fall of the financial markets in America and to ensure that credit would remain available to small businesses and consumers to restart the economic engines.
Bailout money should not constitute any more than a monetary debt that financial institutions owe the government. It was a financial business decision, not a social justice rework. However, I am afraid that Democrats can't help themselves and will use the bailout to further put their nose up the but cracks of every banker in America.
As a former bank examiner and current banker, I can attest that commercial and community banks, like the ones on your street corners are the most heavily regulated business that consumers come in contact with on a day to day basis. There is very very little room for any creativity or innovation in how money is lent, deposits are gathered or fees are charged. That is why every bank for the most part looks and act the same. The threat of adding more regulation to the banking industry as some punishment for the bailout money is just an excuse by Democrats to gain more control, which is always their agenda.
Overdraft fees are not forced upon consumers. They choose to purchase the convenience of having a bank pay their debt without any notice. A bank then charges for that convenience and for now having an unsecured loan to the customer. Yes, banks make profits and overdraft charges a small part of their income. However, if you penalized banks to the point most Democrats want to do, they will not make money and more banks will fail. This is the total opposite of what the TARP money was to accomplish. Then the banks would be the bad guys for not paying back the money.
Many many more strings have been attached to the TARP money since it was first dispursed in November 2008. Banks did not know when they participated that they would be under executive pay limitations or have common products with fees scrutinized. When it became clear early in the Obama administration that this was the agenda, some of them began to give it back, including our own TCF.
Conservative Chick,
Giving it back was a good thing, right? It means they didn't really need it. I am a democrat and I definitiely do not want my nose up your crack. I think it was not most local banks but rather the strip mall mortgage brokers who sold the bad loans and the international investment banks that bought the bundled paper that precipitated this mess; wasn't it?
Giving it back is a good thing. Many banks like TCF were told that if they didn't take TARP money, it would look like they were in too bad of shape to accepted into the program. Some banks took the money so they could build capital and purchase some of the troubled institutions. When the strings became clear, the stakes were too high and they paid it back. You are right about the strip mall mortgage brokers. So, why aren't they being more regulated? Why further regulate the community banking industry when they didn't primarily casuse the problem, why, they are an easy target and regulation is good PR for the politicians.
As Warren Buffett (liberal and Obama supporter) said, when asked if the bailouts done well or done poorly:
"When the patient is lying on the ground with cardiac arrest, that is not the right time to ask how their diet has been or if they plan to start exercising."
Conservative Chick,
Giving it back was a good thing, right? It means they didn’t really need it. I am a democrat and I definitiely do not want my nose up your crack. I think it was not most local banks but rather the strip mall mortgage brokers who sold the bad loans and the international investment banks that bought the bundled paper that precipitated this mess; wasn’t it?
Sorry… forgot to say great post - can’t wait to read your next one!
This has to do with consumer confidence being diminished by banking institutions that are at the heart of this. I agree many community banks are being hurt, but they are being hurt because of the BIG institutions such as Citi Bank, Bank of America, JP Morgan, and Chase.
The freedom that is restricted by consumer protection laws is the freedom of businesses to sell dangerous or even poisonous goods. By preserving confidence in the marketplace, such regulations allow consumers the freedom to make choices, and therefore esteem the intelligence of the American people.
"Overdraft" means you didn't have enough money in your account to cover what you spent. 20 years ago this was called "bouncing a check" and the consequences were severe then as well. God forbid the banks charge a decent fee for people spending more than they have in their account. Get a line of credit on it if you can't manage your balance.
I have to agree with Reggie. People who bounce checks aren't victims in my book.
I agree with you entirely. I view most community banks as the victims here, not the perpetrators. Further regulation of community banks will be of low yield and in fact would be likely to be harmful. I think it was the the selling of questionable mortgages by non-local entities and the subsequent bundling of these "collateralized debt obligations" that were then sold to third parties and removed from the real property they represented that precipitated this disaster. The best of the community banks saw this disaster in the making and many did their best to limit their exposure to it. Better regulation of those markets is necessary and should, in fact, help the locally accountable banks.