PDA

View Full Version : Daylight Robbery



Qtec
06-08-2004, 04:04 AM
June 8, 2004
Federal Reserve Says Banks Can Continue Overdraft Plans
By ALEX BERENSON

he Federal Reserve said yesterday that banks could continue controversial programs that consumer groups say function as high-cost loans used mainly by poor and middle-income people.

The programs enable, and in some cases encourage, customers with low balances to overdraw their checking accounts, allowing the banks to skirt credit laws and collect billions of dollars in fees. They are generally marketed as "overdraft privilege" or "bounce protection" and have grown very rapidly in the last five years, with at least 1,500 banks now offering them.

After studying the programs for more than a year, the Federal Reserve said in a statement that they should not be covered under truth-in-lending laws and did not propose any substantive restrictions on them. The Fed did propose some minor changes in the way the programs were marketed.

The Fed's stance was a defeat for consumer protection groups, which have campaigned against the programs.

The public now has 60 days to comment on the proposed changes, and then the Federal Reserve will consider issuing a final rule, a spokeswoman said.

Under the programs, the banks cover checks that would otherwise bounce, permitting people to overdraw their accounts with A.T.M. and debit cards. Although banks have always offered lines of credit to higher-income depositors with large balances, these programs are aimed at depositors with smaller balances and usually will not cover overdrafts of more than $500.

Each time a person overdraws his account, he is charged a fee of $15 to $35, and the overdraft must be paid back in a matter of days or weeks. Some programs also add a daily fee if the overdraft remains outstanding for more than a few days.

When the overdraft occurs as a result of a debit card or A.T.M. transaction, banks generally do not immediately inform their customers or give them the option to reverse a transaction. Instead, they mail a notice out. So a person who uses a debit card may incur several overdrafts before realizing what has happened.

The effective interest rates on the programs are enormous; someone who pays a $20 fee for a $100 overdraft that is outstanding for two weeks is paying the equivalent of an annual interest rate of 520 percent. Industry consultants who help banks create and market the programs have said that the fees are paid disproportionately by low- and moderate-income people.



I guess the banks, after losing loads of money on bad deals such as Enron etc, have to get their money from somewhere.

Q

moblsv
06-08-2004, 07:10 AM
That pretty much describes todays standard business model. All big business' are using "undisclosed, sneaky or illegitimate fees' as income. Those living paycheck-to-paycheck are particularily highly targeted.

Wally_in_Cincy
06-08-2004, 08:10 AM
I wonder how those short term loan places are allowed to stay in business. It would seem they would violate usury laws.

then there's the rent-to-own ripoffs.

I guess they perform a needed service but I couldn't own one in good conscience.

wolfdancer
06-08-2004, 08:19 AM
Wally, I'm "renting-to-own"....course my bank calls it a mortgage.should have this place paid for in around 30 years..

moblsv
06-08-2004, 09:05 AM
A guy I went to High School with runs a chain of those title loan places. He charges 1% per *DAY*, even if that's not compounded that's 365% per year - WOW. Says a lot for the value of keeping good credit. My highest interest loan is 5.5% per year.

My girlfriend recently got caught in this bank fee thing. She went over by a few cents and got a $35 charge. Not knowing yet that this happened she transfered some more money from savings knowing she had a low balance then wrote a couple more small checks that again went over because she didn't know she had been charged the $35. Now she had two more $35 fees. She ended up with $105 in fees because she didn't keep track close enough and went over by a few cents.

eg8r
06-08-2004, 10:03 AM
I completely agree with Wally, I could not in good conscience own a company like these.

[ QUOTE ]
My girlfriend recently got caught in this bank fee thing. She went over by a few cents and got a $35 charge. Not knowing yet that this happened she transfered some more money from savings knowing she had a low balance then wrote a couple more small checks that again went over because she didn't know she had been charged the $35. Now she had two more $35 fees. She ended up with $105 in fees because she didn't keep track close enough and went over by a few cents. <hr /></blockquote> There is a reason the rules are in place. It is unfortunate she got hit multiple times in a row. That really does suck, but there are tons of people that abuse these rules and make it burdensome on the rest.

eg8r

Wally_in_Cincy
06-08-2004, 10:38 AM
<blockquote><font class="small">Quote eg8r:</font><hr> ...... There is a reason the rules are in place. It is unfortunate she got hit multiple times in a row. That really does suck, but there are tons of people that abuse these rules and make it burdensome on the rest.

eg8r <hr /></blockquote>

I did not overdraw my checking account for 15 years then....

During the week leading up to the DCC in all my excitement I wrote a check which I forgot to record. The next week I went to the ATM. It gave me the money but my receipt showed a negative balance. Turns out that ATM withdrawal was the third overdraft in 3 days.

When I got home I had 2 notices in the mail. I would have had one of them a day earlier if not for the local ice storm that weekend.

I went to the bank and asked them "DON'T YOU HAVE MY PHONE NUMBER???" /ccboard/images/graemlins/smile.gif

"Sorry sir, our policy is to send a notice in the mail"

dirty bastards /ccboard/images/graemlins/smile.gif

cost me $72 in fees

eg8r
06-08-2004, 12:16 PM
[ QUOTE ]
"DON'T YOU HAVE MY PHONE NUMBER???" <hr /></blockquote> They only use the phone number when someone deposits millions of dollars into your account as goodwill. /ccboard/images/graemlins/smile.gif Other than that, they lie waiting for you to overdraw.

eg8r