Wednesday, October 07, 2009
The editorialists at the New York Times want the government to regulate banks in the matter of charging overdraft fees on debit cards. The idea seems to be that it is unfair to impose a penalty on people who use a debit card to spend money that they do not have. It never occurs to the editors that people can avoid these fees by only spending money that they know they have in their account. The argument seems to be that the government ought to indemnify people against actually ascertaining how much money they have before they spend it. You know, because pressing the "balance inquiry" button and remembering what else you have spent in the last 48 hours is so damned difficult.
I have never had to pay an overdraft fee because I was taught to believe that writing bad checks, which is morally identical to using a debit card when you have no money in the account, is a bad thing to do whether or not it is unlawful or in violation of your agreement with the bank. Candidly, I did not do such a great job in passing that lesson on to my children, one of whom had to learn it the hard way -- he had to pay onorous fees when he spent money he did not have, thereby worsening his admittedly temporary but nevertheless inconvenient poverty. The steep fees taught him something important, and -- presumably -- he will not do it again.
We live in a complex world, and there are all sorts of things that are so confusing that ordinary people -- by which I do not mean the stupidest people, but ordinary people -- cannot be expected to understand them. In such cases, the government ought to require clear disclosure and perhaps even ban certain practices. But have we really reached the point when we cannot reasonably expect Americans to know how much money they have in the bank? If so, then we might as well just surrender all our freedom right now. Which, presumably, would be just fine with the editors of the New York Times. At least until the Republicans regain power.
What sucks though, is if you have a small amount of money in your account (<$5) you're in great danger of overdrafting by a tiny amount simply through bank fees, specifically through balance inquiries at an ATM that isn't owned by your bank.
They still do some slightly dishonest things. For example, they tell you about withdrawal fees for not-your-bank ATMs, but they don't do that for balance inquiry fees, which punishes responsibility. That was part of my "learning the hard way."
I can understand the moral issue here, but should someone overdraft by <$0.50, getting hit with a $35 fee then a $7 fee for every day after just doesn't seem right to me. I know this argument could be made: "What if ALL of their customers overdrafted by $0.25 all the time??!!1! Think about all of the money they'd lose!1!!11" It seems like the bang you'd get out of ignoring overdraft charges less than a dollar, like earning your customer's trust and earning points with God, outweigh the few thousand or so that it would cost you.
The fees are often high and a profit center for the banks. Without regulatory limits, competition (i.e., greed) pushes banks to hose people when they can. Banks should welcome some regulation here -- to rein in their worst instincts -- as they're already in danger of a huge populist backlash, some of it deserved. They were bad on credit cards too.
Never, never never. No overdraft for vicki. I understand the B of A makes something like 1/2 billion each year just on overdraft charges. Don't spend it if you don't have it. I would rather have the transaction declined. Check your balances, people. I do at least once a day. Quicken works great, too. Track everything, too much fraud going around.
In my long lifetime I have seen a lot of economic ups and downs. I have found that a bank can waive many fees when a reasonable explantion was offered as to the reason for the overdraft. I got stuck once by that "fee caused an overdraft which caused a fee" trap once myself, but a phone call cleared it up.
I have an example of how banks end up hurting some customers with the way that they implement their overdraft fees. I read on a consumer blog about how a woman's debit card was stolen, and charges made caused her to overdraft. When she was apprised of the situation, she requested that the account be closed to prevent further charges and more fees (which she had already accumulated at least 7 or 8 and $35/pop). The mega-bank refused until she brought the account to $0 balance. Because there was a lag between depositing money and closing off the account, the identity stealer struck again. This happened several times before the woman was able to finally convince the customer service reps to close her account. Then they entered into a lengthy debate over whether she was liable for the overdraft fees, even though the Visa protections on her guarantee that she was not liable for charges made by someone who had stolen her identity.
Now, this is likely a problem with the customer service of large mega-banks versus an argument with overdraft fees as a practice, but I find the whole shoddy record of how mega-banks treat their customers really distasteful. I've exercised my rights as a consumer to use a local credit union with an excellent reputation, and thus have never had these sorts of problems.
I don't think regulation is the answer, I should say. I will say that I believe banks to be very draconian in how they charge these fees and then nickel and dime people who've made honest mistakes. Consumer blogs are rife with complaints about this sort of thing.
Banks are like relationships back when you were dating. You go along and you go along and they do their shitty little banker stuff and you overlook it and go along and go along, and one day they do their banker stuff - "Oh, we returned the check, charged the fee, returned the second check, charged the fee, forgot to trigger your overdraft protection, and then we credited your deposit so now your balance is just fine" -- and you realize all of the sudden that you can't stand them any more, not for one more minute.
I tell them politely that I am sorry they decided to end the relationship.
Dealing with Banks 101 Phrasebook
"I would like to speak with the manager"
"Unless these charges are taken off my account immediately, I will transfer all of my accounts across the street to that bank, which my brother tells me is problem-free and has never refused to remove an unfair charge.”
“I was in here last week with this same problem. This will be my last visit for this problem.”
I keep a standing balance of over $500 in my account at all times, and have not had an overdraft since college (due to a transposed number on a check, quickly resolved).
In the late 1980s I was stationed at Ramstein AB, Germany. The DoD sanctioned bank at the time was American Excuse. One month an extremely large number of officers and senior NCOs had overdrafts. The bank tried to make it look as though all of us couldn't do basic math.
Like many others, I had a substantial pad in the bank to prevent any overdrafts yet American Excuse said that I bounced two checks. When they couldn't find any math errors, they just said that it was my problem. In a loud voice I said that the problem was that someone inside the bank was using the money during the month and that they just didn't put it back in our accounts in time. The manager was out of his office in a flash and told everyone in the lobby that American Excuse would never have anyone stealing money in that manner.
Three months later Stars and Stripes reported that in fact two American Excuse employees were in fact stealing money from accounts and did make a mistake causing multiple overdrafts. I went back to the manager with the article and asked that he return the money he took for the overdrafts caused by his bankers. Of course he didn't pay.
Last year while on business in Montreal, B of A charged me more than $750.00 for overdraft fees. Why? Well, every time I used my debit card I was charged 3 times. Once for the purchase, once for a foreign bank fee and once for an exchange rate adjustment, which hit my account in the middle of the night. The reason for the overdraft? They decided to hold 2 paychecks for 14 days, after years of instantly crediting my account. One special morning, I paid $105.00 in fees for a coffee and muffin. When I called the service center to complain, they even refused to place a hold on my account until I returned to the USA and requested it in person. My first trip to the bank upon my return was to fire that bank.
Here's what my bank, and many others do: When they run the updates at night, they process all debits first, largest to smallest. Then they post the credits. If the debits exceed the available balance, overdrafts ensue, which are taken out by your credit that follows. My beef is that, if, due to circumstances like being a student, or being unemployed, and forced to live precariously close to the line, this process hurts. A carefully monitored balance of $100 as of 8AM, with a check written for $75 to the water company, a cash deposit of $75 to cover the check at 12 Noon, and an automated debit of $50 for your phone service. Guess what happens? All our banks need to do is process the credits first, and this kind of problem, which is common, would disappear. Won't happen, which is why banks have such a lousy reputation just now.
As long as we're doing bank stories, here's mine, about a Colorado Credit Union. Once upon a time, a long time ago, a supplier bounced a check to me. They quickly covered it. A few weeks later I deposited another check, and incurred a spate of overdraft charges over the next week or so. When I went in to the Credit Union to inquire about this, they told me that they had instituted a 10-day hold on any checks into my account. I thought they should have told me this, and they thought they shouldn't have. So I took out all but $25 and made sure that my statements were paper. Every year or so they complain in writing about inactivity, and I withdraw the accumulated pennies or nickels of interest; or the next year, I put it back in. There's about $42 in there now, and it costs them about $2 in postage alone, not counting labor costs, to keep my account going. I have warned my children they will have to deal with this when I die, which if family standards obtain, will be in another 35 years.
I believe my conduct here is somewhat consonant with the Golden Rule, and absolutely consonant with the Categorical Imperative.
I've found that when banks charge fees for the sorts of screwups described in most of these examples they will refund them if you ask. Lots of businesses make mistakes in their charges and will refund the money if you complain. Banks are no different.
Banks don't look at us all the same way they look at you. When I was young I deposited a check at a different branch than mine, but didn't get credit as it got lost in their system. Even though I had a stamped deposit ticket, they told me to pound sand.
So I deposit this check for about $5550 and the bank online says $55550. I write them a letter (paper letter, you remember them) that says please recheck my balance it looks way too high. I get this snotgram on monogrammed bond paper saying there is nothing wrong with my account or their accounting and the balance is correct. Even with that written warrant I don't spend the money. Along about the end of the year six months later I get this other snotgram that says how they've taken the money back and I never should have thought I was going to get away with it. Really insulting. So like honesty is its own reward as well as the best policy, yadda yadda, but in stead of the one I got I was kind of expecting this note that says, Hey thanks for not blowing the $50gs that we told you in writing were yours, and as like this big reward, here's 1/10000 of the amount, a big $5, Dude! go wild at McDonalds with a Happy Meal on us for not chopping down the Cherry Tree.
Later they underwent the Change; one day they are National Bank of the Flint Hearts, and the next they are First Amalgamated Stony Hearts of Nebraska - they either got to Madoffing some pension fund in Kansas, or they suckered for a home-grown Kansas Madoff and wiped out their Tier One capital many times over, and in came the bank examiners and away went the owner to the Big House.
I think I've experienced all the problems mentioned above at one time or another in the 45 years I've had a checking account and worked as a bookkeeper.
And banks seem to have no idea how far just a bit of kindness can go.
I am payee for a disabled person's SSDI. That account is drawn down to low single digits every month after paying his expenses. My huge mistake was ordering the same least expensive checks offered for both his account and mine.
One week, when I'm out of town, my husband needs checks and grabs the SSDI account checks, which have his name on them nowhere. He wrote three checks, totaling over $300.
There is no overdraft protection agreement on the SSDI account, but the bank paid the checks, charging a $35 fee for each. Frankly, I was thrilled they paid them which saved my husband and I much grief.
I called the minute I got the mailed notice about the first check, by which time the second had presented and been paid.
After the rep looked at the history of that account (which was pretty much identical for the last 8 months) she agreed with me that something was fishy. With electronic check processing, they didn't have copies of the checks, so that was no help, but it finally (!) occurred to me to check the check numbers... sure enough an entire book was missing.
When we had figured out what had happened, I immediately transferred money from my account to the SSDI account to cover the overdrafts and fees. Since this whole thing was obviously not the fault of the bank, I was not going to ask the fees be refunded.
But the customer service rep offered to put in a request for refund, stating she had no idea whether it would be approved, but that it was obviously an innocent mistake.
I've been good-mouthing this bank ever since. Capital One, btw. Only available in Texas and Louisiana, afaik.
I'm generally against more regulation, but the banks are (as one of your commenters pointed out) gaming the system. They do order the way they post credits and debits, SPECIFICALLY to try to catch accounts in overdraft, even if the actual time sequence of the person's activity would prevent an overdraft. In particular, I believe that many banks are now stating that transactions will be posted by the close of the next business day (instead of the close of the business day on which they occurred) precisely because that gives them more opportunities to line up all the debits first, then claim an overdraft, then post the credits back in. In this case, someone needs to stop this manipulation.
Let's shut down all the banks forthwith and give their functions to the Tresure Dept. So every branch and every ATM will be Treasury and if any mistake happens, just call the good old Treasury!
What can be simpler and/or easier?