Why Are Overdraft Fees Legal?

[mawilson 2,133]

That company would be fined into submission in the UK or AUS, which that sort of #######.

The should be able to make a fair buck but the rate is bloody extortion. I would jail the directors and executives for that.

I saw an even better one the other day - APR 288%. Good luck!!!

[one...two...tree 2,762]

Yep, their are lots of predatory banks and lending agencies out there. No arguments. I totally understand how new immigrants can get sucked in by one of these despicable companies too. Unfortunately, live and learn is the only solution I can think of. If anyone thinks the government is going to fix anything, they are mistaken. No politician is going to prevent banks/lending agencies from making as much money as they want. All they will do is make it a bit more difficult. Politicians don't want to piss off any consistent campaign contributors by actually doing something worthwhile for their constituents without any loopholes.

The thing is - banking didn't use to be this way. It was through deregulation that allowed banks to start charging fees for everything under the sun. They have a might powerful lobby that appealed to the laissez-faire politicians that they needed less regulations in order to fully provide services to their customers. The only way to stop this nonsense is to bring back the types of financial regulations that protected consumers as before.

[AlHayatZween 2]

i hate the big banks. i hate how every time i walk in to ask a question or make a minor change in one of my very basic accounts, they always try to sell me something or push me into opening another higher-risk, fancier account. It is a racket.

Don't get me started on the phone companies... i've gotten better service and a better deal in the Sahara, where there is nothing but sand for miles and miles.

[mawilson 2,133]

The thing is - banking didn't use to be this way. It was through deregulation that allowed banks to start charging fees for everything under the sun.

That's silly. Back in the "good old days" (1970s?), banks didn't charge ATM or credit card fees

because ATMs and credit cards didn't exist. There were no overdraft fees because folks used

to go to a bank branch to get their cash.

[SMR 368]

Yep, their are lots of predatory banks and lending agencies out there. No arguments. I totally understand how new immigrants can get sucked in by one of these despicable companies too. Unfortunately, live and learn is the only solution I can think of. If anyone thinks the government is going to fix anything, they are mistaken. No politician is going to prevent banks/lending agencies from making as much money as they want. All they will do is make it a bit more difficult. Politicians don't want to piss off any consistent campaign contributors by actually doing something worthwhile for their constituents without any loopholes.

The thing is - banking didn't use to be this way. It was through deregulation that allowed banks to start charging fees for everything under the sun. They have a might powerful lobby that appealed to the laissez-faire politicians that they needed less regulations in order to fully provide services to their customers. The only way to stop this nonsense is to bring back the types of financial regulations that protected consumers as before.

No, I don't think the "good old days" argument works here. Banks didn't used to have ridiculous fees because they hadn't thought of it or the technology didn't permit it.

[Gary and Alla 3,696]

The Finance Lobby

— By Kevin Drum

If you use your debit card and overdraw your account, your bank will hit you with an overdraft fee. If you make five purchases of ten dollars each on the same day, you'll get five more overdraft fees. And just to make sure you get hit with as many fees as possible, your bank will make sure to debit your biggest transaction of the day first — even if it was actually the last one you made that day. That way your account goes to zero faster and every subsequent debit triggers another fee. Ka-ching! That's all bad enough, but there's one more thing: you have no choice in the matter:

Sen. Christopher J. Dodd (D-Conn.) plans to introduce legislation requiring banks to get permission from customers, rather than allowing overdrafts automatically. If customers decline and then try to overspend, the transaction would be rejected. A similar bill is pending in the House.

Dodd dismissed concerns about the impact on ailing banks. "People out there are getting whacked," he said. "They should have the right to say, 'Deny me the transaction.' "

Well, good for Chris Dodd. I hope his legislation passes. But seriously, ask yourself this: what does it say about the power of the finance lobby in America that this was ever legal in the first place? I mean, it's not even a close call. It's just flatly outrageous. It's outrageous that banks should be allowed to charge fees that amount to 1000% interest rates on a short-term loan; it's outrageous that they should be allowed to reorder your debits to make you pay more of these fees than you should; it's outrageous that they should be allowed to charge multiple fees per day in the first place, since they're essentially just making a single loan; and it's outrageous that they should be able to do this whether you want them to or not.

Let's say that again: They can force you to accept a loan at 1000% interest whether you want it or not. And no one before now has been able to stop them.

Think about that the next you see one of those happy happy happy Visa debit card commercials where they're exhorting you to just swipe that card for every purchase you make without giving it a second thought. There's a reason for that. And there's a reason they can get away with it.

http://www.motherjones.com/kevin-drum/2009/09/finance-lobby

Yes, and what? This situation terrifies the hell out of me since there is nothing I hate more than FEES for which you get NOTHING. I would rather feed a slot machine somewhere and it would be more responsible of ME. So, guess what...I DO NOT OVERDRAW MY ACCOUNT!!!! Duh!!!!

what kind of MORONS does Dodd assume we are? There is a simple solution to the problem...if you don't have the money in the BANK wait until you do!

Individual liberty, individual responsibility! any questions?

[Gary and Alla 3,696]

The thing is - banking didn't use to be this way. It was through deregulation that allowed banks to start charging fees for everything under the sun.

That's silly. Back in the "good old days" (1970s?), banks didn't charge ATM or credit card fees

because ATMs and credit cards didn't exist. There were no overdraft fees because folks used

to go to a bank branch to get their cash.

That's silly. I was alive and working and banking in the 1970s and couldn't find an ATM or debit card anywhere!!!!! No online, real time banking, no blackberries to check my bank balance while on an airplane. I tell you, the good ol days were hell on earth! We didn't even have cell phones to call the bank! All these fees can be avoided (and all the advances enjoyed) for FREE with just a little individual responsibility. I think Dodd ought to introduce legislation tripling bank fees to protect those of us that do what is right.

[Nik+Heather 122]

I think people who spend money they don't have *deserve* to pay the fees. And every time they thoughtlessly charge without knowing their balance, they should get slapped again. I've gotten there before as well, and while I wouldn't say I "happily" paid it out, I think I deserved it quite soundly.

The only part which I agree with is about the preferential/time shuffling - taking 3 days to credit the deposit but almost instantaneously debiting the charge isn't fair, but on the other hand, it is the responsibility of the consumer to know the rules and if you don't follow them, or don't take your business to an institution which operates the way you need, I don't have a lot of any sympathy.

In this day of digital technology, a bank can simply deny the transaction. Furthermore, someone spending $1 over does not deserve to pay a $35 dollar fee. Then another $35 fee for the fee going over.

I once wrote a check using my wrong check book and HSBC covered the entire $800. So in that case, sure I had no problem paying the single fee. The fee is warranted for that amount overdrawn. Actually HSBC told me to contact them after it posts and they would refund the fee but I didn't bother.

If someone can't track their money, they should use cash. They can't spend that extra $1 if they don't have it, and if they need the physical bills to tell them what they do and don't have, then they need to use them. Digital money and the debit card to go with it is a convenience and it requires responsibility. If a person can't be bothered, they deserve the consequences. In fact, a LOT of people have debt issues because they aren't aware in the slightest of how much money they are spending. Those bits of plastic don't look any different depending on how much money is behind them - just keep sliding them through the reader!!!

Edited September 24, 2009 by Nik+Heather

[Gary and Alla 3,696]

Yep, their are lots of predatory banks and lending agencies out there. No arguments. I totally understand how new immigrants can get sucked in by one of these despicable companies too. Unfortunately, live and learn is the only solution I can think of. If anyone thinks the government is going to fix anything, they are mistaken. No politician is going to prevent banks/lending agencies from making as much money as they want. All they will do is make it a bit more difficult. Politicians don't want to piss off any consistent campaign contributors by actually doing something worthwhile for their constituents without any loopholes.

The thing is - banking didn't use to be this way. It was through deregulation that allowed banks to start charging fees for everything under the sun. They have a might powerful lobby that appealed to the laissez-faire politicians that they needed less regulations in order to fully provide services to their customers. The only way to stop this nonsense is to bring back the types of financial regulations that protected consumers as before.

The way to FIX this is by being responsible. YOU can do it YOURSELF today...really, you can! YOU do not need to wait for the glacier slow congress to protect your money from the banks...do it yourself! Neither Dodd, nor anyone else, can legislate responsibility. Irresponsible people (and I fully support your right to be irrespomsible, at your expense) should PAY for their irresponsibility, that's all.

Applying regulations will only cause banks to withdraw lots of FREE services that benefit responsible people. People do not need to be protected from themselves, they need to be protected from other, irresponsible people, by draconian bank fees.

And please, do not even TRY to say people are "too stupid" to manage their own money and need congress to it for them. That argument is insulting.

Edited September 24, 2009 by Gary and Alla

[Trumplestiltskin 5,791]

You can't legislate responsibility, but you can certainly legislate against exploitative business practices.

[The_Dude 1,142]

You should be able to stipulate to your bank whether or not you want to use overdraft protection. Many banks simply sign you up for the service when you open a new account and don't even bother to ask. I think the fees for every little service is ridiculous. But, as was said before, not all banks do that, but the onus is on you to seek them out. I think it's quite simple though, If you write a check, or use your debit card for an amount greater than what you have deposited in the account, you are spending irresponsibly. The last two banks that I have had deposits at have always given you the option, upfront to sign up for overdraft protection, or to decline it. If you have signed up for overdraft protection and the bank is lending you money to cover you, you are at the mercy of the agreement into which you entered. It's nobody's fault but your own if you didn't bother to read what the rates were.

[Jasman0717 9]

I think it is a huge rip-off that credit card companies are allowed to charge 30% interest. Maybe the preamble needs to be changed from we the people to we the politicians and friends

[Gary and Alla 3,696]

i hate the big banks. i hate how every time i walk in to ask a question or make a minor change in one of my very basic accounts, they always try to sell me something or push me into opening another higher-risk, fancier account. It is a racket.

Don't get me started on the phone companies... i've gotten better service and a better deal in the Sahara, where there is nothing but sand for miles and miles.

yeah, and their immigration is probably better and faster too! So I guess you will be applying for a fiance visa to Morroco any day now.

CARE about your own business and Christopher Dodd won't have to. Good grief.

[rsn 135]

I think it is a huge rip-off that credit card companies are allowed to charge 30% interest. Maybe the preamble needs to be changed from we the people to we the politicians and friends

There's a difference between charging high interest rates (as long as you inform your customers ahead of time) and burying bizarre fees in the fine print. Companies should be able to do whatever they want as far as charging fees or interest as long as they properly inform customers. If they don't like it they can take their business elsewhere or focus on living within their means. My only problem is tricking customers into paying fees and signing up for worthless services, which definitely happens.

[Trumplestiltskin 5,791]

I think it is a huge rip-off that credit card companies are allowed to charge 30% interest. Maybe the preamble needs to be changed from we the people to we the politicians and friends

There's a difference between charging high interest rates (as long as you inform your customers ahead of time) and burying bizarre fees in the fine print. Companies should be able to do whatever they want as far as charging fees or interest as long as they properly inform customers. If they don't like it they can take their business elsewhere or focus on living within their means. My only problem is tricking customers into paying fees and signing up for worthless services, which definitely happens.

One thing that bugged me is how they would automatically sign you up to new services, unless you purposefully opt out of them.