Banks extend credit when they cover overdrafts for a fee. However, the Federal Reserve has failed to require banks to comply with the credit laws that apply to other short-term cash loans. As a result, consumers are permitted to overspend their checking accounts without affirmative consent, do not get comparable cost-to-borrow information, and are not warned when a transaction will trigger an overdraft. Banks do not provide affordable installment repayment terms for these loans, but take payment in full out of the next deposit into an account, making the bank first in line for a consumer’s next paycheck or Social Security payment.
As a customer of TCF bank back in college, I once withdrew $20 from the ATM without realizing that there was only about $15 available in my account. (Yes, I should have had a better idea of what was in my account, but that’s not really the point here.) I didn’t really need that $20 right then and there; had TCF informed me that I didn’t have $20 to withdraw, I would have simply waited a couple of days until my next paycheck was deposited. Instead, without warning me that the transaction would cause my account to become overdrawn, they proceeded to charge me a $35 overdraft fee. That was incredible to me; this wasn’t even a purchase transaction — I was withdrawing money directly out of a TCF ATM!
I’m sure everyone has at least one story like this, in which they were charged over $30 for a transaction they never would have performed had they been asked for consent to charge an overdraft fee. The cost of a $10 overdraft is exorbitant — in fact, going back to the classification of overdraft fees as loans, what they most resemble is payday loans:
Both are due and payable within a few days. Payday loans are due in full on the borrower’s next payday, generally 14 days. Overdraft loans are due and payable immediately. If not repaid within days, some banks add additional fees.
Both loans cost triple or quadruple-digit interest rates. The annual percentage rate for a one-week $200 payday loan at $17.50 per hundred is 910 percent, while a $200 overdraft loan repaid in one week for a $35 fee costs the same. The FDIC reported that a typical $20 debit overdraft, costing $27 fee, repaid in two weeks costs 3,520 percent APR.
Both put borrowers in a debt trap. The typical payday loan borrower has 9 loans per year and ninety percent of the business is generated by borrowers with five or more loans per year. The FDIC reports that 84% of all insufficient funds and overdraft fees were paid by 8.9 percent of account holders who had ten or more overdrawn transactions in a year.
What’s even worse is that many banks still purposefully manipulate transactions to try to create additional overdraft fees. Many banks, for instance, will apply the largest transaction made in a day first, even if it was the last one made, which can lead to multiple overdrafts in a day, sometimes over $100.
Our banks urgently need to reform the way overdrafts are handled. In certain (rare) situations, paying the fines for an overdraft is the lesser of two evils, and overdraft protection can legitimately help consumers who aren’t able to wait for a deposit to clear, for whatever reason. Most of the time, though, overdraft fees are just a way for banks to make a lot of money off of consumers who think there’s a bit more money in their account then there really is.
I have no intelligent comment other than "I agree wholeheartedly!"
It's a travesty that TCF banks have a monopoly all over MNSCU campuses. They take advantage of new college students, who inevitably make some mistakes with debit cards at first. Is it possible to find out how much in fees TCF is raking in each year from college students?
I say kick TCF off campus and encourage students to join a credit union.
My son, a U of M student, has taken out more from his TCF account than he has twice so was charged overdraft fees. He used the ATM to check his balance immediately before taking out $$ and did not take out more than the balance indicated. When he called to find out what was going on, he was told that the balance supplied by an ATM query is NOT CURRENT!!!! WTF? Fortunately, he had saved the receipts and got them to reverse the charges - and now knows to check his acct. online before he withdraws cash from an ATM.
I would suggest everyone look in to joining a credit union. None of this garbage happens with the one we use.
What a bunch of communist whiners. Did you socialist ever think that unbridled greed is the American way? Banks are considered entities like citizens and deserve every dollar they screw out of the stupid, poor or unwary.
(Ahhh that Ayn Rand virus must be going around again…)
Max, I went to a TCF in a Cub Foods to add to my son's account, and the teller told me to let my son know that every time they check their balances on an ATM, that they are charged a fee. Oh, and my son also found out the hard way that the balance shown on the ATM statement is not current. It's a racket, and college students are exactly the consumer group that robber banks salivate over. What deal did TCF make to get their monopoly?
"reigned in"?
better than "rained in". Literacy is not required to be one of the million monkeys typing frantically in the blogosphere.
yes because actually expecting people to be responsible for the amount of money they have is ridiculous - a much better idea is to have big government save us from our selves and tell us what free contracts we can and cannot enter into.
Do you know what a credit union is, you right-wing boob?
Credit unions are run by, and for, the members. It's a truly democratic system. No disconnected stockholders to report to.
Even checking online can be out of date. My landlord deposited a check on Monday that still hasn't appeared on my balance or in my activity. If I didn't know that, I would be under the impression that I have an extra $264. Plus, sometimes they wait to post NSF fees, so you'll think you're in the clear and a few days later you'll have 2 or 3 fees show up. It's way too expensive to be poor in this country. TCF is awful.
"I say kick TCF off campus and encourage students to join a credit union."
An off-campus credit union might be a good alternative for those students who are less adept at managing their money. But why kick TCF off campus? That just punishes the remaining students who ARE capable of balancing their checkbook and like the convenience of an on-campus bank.
I learned about the (lack of ) integrity of TCF Bank about 20 years ago. I had a checking acct at that time, and once wrote a check for $50. Not long after, I had 3 checks bounce. After some digging, I found that the $50 check had actually drawn $100! Nobody could give me an explanation.
After having the overdraft fees removed, I closed my account and have never done business with them since.
Credit unions are the way to go. UW has an excellent one for all students. U of M should do likewise.
Do you honestly think banker bonuses grow on trees? If you believe that, I will tell you another one about the Goldman tooth fairy who is ot there doing God's work. Overdraft fees may indeed end but there will be another one substituted for it. All of this will continue until we elect a congress of the people, not the best congress money can buy.
RonD
i agree with it. every student have its own credit union.
I think this is the correct way
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