According to a recent study by the Center for Responsible Lending, that amounts to about $17.5 billion a year. That is billions of dollars that goes direct from customer pockets into bank organized and manipulated profit centers. Is this legalized bank robbery, by the bank?
Let's start this missive with one obvious fact: It is the bank customer, and only the bank customer, that is in the best position to know what their actual bank balance is. It is not the Banks' responsibility to balance every customer's check book. If the customer attempts to spend more money than what is in his/her account, there is a price to be paid. What is the fair cost of that pound of flesh? There lies the question.
Bankrate.com says that fees for insufficient funds at major banks ranged from $10.00 to $38.00, with a median fee of $27.50.
In a shameful report issued last Wednesday, the above named Center for Responsible Lending accused banks and credit unions of purposely using the system so that customers get caught paying more fees than necessary, without any warning.
"A single surprise overdraft can trigger a domino effect that plunges account holders deep into the red", said Eric Halperin, director of the research group's Washington office, he went on to say that the "practices were so abusive that they, now must be counted among the insidious predatory lending practices that take money from American families."
What has brought on this bankable phenomenon? we can start with two words: Debit Card. In the old days, (as recently as 2004), if you attempted to use your debit card without the actual funds available, whether in a restaurant or a shoe store, 80% of most banks responded with that horrible word...REJECTED. Today, in this 24 hour a day banking world, most banks never say no. Bingo for the banko! As Greg McBride , a senor financial analyst at Bankrate.com said, "You can't rely on a low account balance running into a brick wall and a transaction not going though. That $4 coffee could cost you $34 with an overdraft fee."
Then, there is the reliable cash cow utilized by many banks. They simply process your daily transactions in order by a "highest" to "lowest" amount. For example, You have $400 in your account and the bank receives five transactions in the amounts of, $375.00, $26.00, $18.27, $6.68 and $4.32. It is common practice for banks to "pay" the $375.00 and bounce the other four charges, hitting you with that $27.50 fee on each one. How is this justified by your trusted bank officials?
Here's one take on it. Christine Hobrough, U.S. Banks retail marketing manager in Minnesota explained how the U.S. Bank's practices of processing transactions highest to lowest is aimed at helping consumers. "Our research several years ago found that the highest checks tend to be the most important things in life---the mortgage or rent, their car payment or taxes. Critical things that need to be paid," she said, "Consumers want assurance that those things are taken care of as opposed to the person that mowed the lawn."
The third most common bank practice that eventually results in overdraft fees is a very simple one. The bank simply puts a "hold" on your deposits for as many as 11 days, while you try to juggle your payments.
So, today this is all legal and legit, but there may be help on the way. There is a current bill from rep. Carolyn Maloney, D-N.Y. in Congress, "that would require banks to tell people at the ATM and possibly at the checkout counter when accounts run dry. It would also prohibit banks from charging overdraft fees unless customers have agreed to pay them."
Of course, the easiest way to avoid these charges is a simple one. Don't spend what you don't have. Listed below is Deb Frey's blog "Customer Abuse Index"
Saturday, April 22, 2006
Top 10 Signs Your Bank May Be Abusing You
1.) Placing lengthy holds on your checks
2.) Charging fees for bad checks written to you
3.) Monthly account fees. I would much rather have a bank charge up-front service fees each month instead of attempting to find back door ways to raid my account.
4.) Outrageously high overdraft fees
5.) Overdraft tripping point a. - Clearing checks largest to smallest
Overdraft tripping point b. - Clearing checks sequentially by check number
6.) Posting deposits after clearing checks
7.) Withdrawing money from your saving account when you are overdrawn
8.) Too many option. When a bank has too many ways for money to come and go from your account, its a sure sign that they're up to something
9.) Your online bank statement is not the same as the bank's record
10.) General impression that operating your bank account feels like you're walking through a mine field. If a bank is more concerned about collecting its fees than it is in maintaining a good relationship with you, its customer. Walk away!!!!