Overdraft bill must balance customer, bank needs

This is silly – don’t spend money you don’t have, and you won’t have any overdraft fees. If you want to spend money you don’t have or if you don’t want to worry about these overdraft fees, a CREDIT card is the correct tool. If you want to spend money you do have, a DEBIT card will work. But understand the difference.

It’s not about purposely spending more than you have. Its that sometimes you think I check you wrote has already been cashed, but hasn’t and you think you have more money than you do. Pretty soon you made 6 debit card purchase and have $300 in fees.
Yes, you should keep track better, but if you are a busy student sometimes it is hard enough to just remember when you have a test.

Where does the money come from when irresponsible bank account holders are allowed to make a transaction despite having insufficient funds? Fellow bank customers who are responsible enough to maintain a proper balance.

Where does Congress get money to give to people who have not earned it (i.e. personal and corporate welfare, stimulus spending, bailouts, cash for clunkers, et al)? Fellow citizens who are responsible enough to be productive and pay taxes.

THAT should have been the focus of the editorial.

I think most of us can agree that it is fine to punish people for poor financial planning. However, the fees are grossly disproportionate to the damage to the bank. These banks are basically writing in unreasonable punitive damage clauses into contracts you sign when you open a bank account. If these fees were in other contracts, they would be thrown out by courts.
Banks are increasingly turning to fees as a source of income along with increasing interest rates with little or no notice.

WAHHHHH! I spent more money than I had and the meanies at the bank punished me for it. WAHHHHH! Mommy government, help me!

More pathetic help for people too concerned with their own existence to take any responsibility for their actions. In a 6-year colelge career, including a masters in engineering, I never overdrafted ONCE. Of course, I know how to balance a checkbook and I paid attention to my expenses, but those are skills that students today appear to be lacking.

Our government is absolving the consumer of any responsibility by soaking up bad mortgages, allowing them to dump their credit card debt, and falsely pumping taxpayer money into a “stimulus” that so far has only benefitted John Carlo and Generous Motors. I guess we can throw out consumer responsibility to not spend more than they have as well.

Granted, many banks overdraft fee tactics are nazi-like, but honestly, kids nowadays spend WAY more money than they should be.

You DON’T need those designer clothes.
You DON’T need cable TV.
You DON’T NEED A CAR.
You DON’T need expensive food, if you are a student you should be eating ()&^(ing oatmeal.
You SHOULDN’T BE DRINKING MORE THAN A COUPLE DRINKS A WEEK.

You get what you deserve.

Zeke-
The bill doesn’t take away the right to punish people for overdrafts, it simply asks the punishment to fit the crime.
There is no way a bank suffers a $300 loss when someone overdrafts by $3.
Seems like a lawyer should form a class action suit to challenge the validity of these contracts.

Jason,

You own statements prove why increased fees are necessary. People obviously haven’t learned not to overdraw from their accounts, so banks are ratcheting up the penalty for doing it. Maybe when an overdraft fee hits $50, people will finally stop using the bank’s money to pay for their recklessness. It’s a punitive damage, something very common in legal cases to prevent similar problems in the future.

The “contract” you refer to is agreed to by the customer at the start of the account. If the bank changes the terms, the customer can walk. This is how private industry works; if a bank charges obscene fees for simple services, it goes out of business. This is why you don’t see fees for checking accounts or online banking at many banks – they’ve realized that it keeps customers.

There is absolutely no need for the government to meddle itself in this.

Zeke-
Please point out to me how my post illustrates why disproportionate fees are necessary. Is there any study or proof of any kind that shows higher fees lead to fewer overdrafts?

I’m aware that the contract is agreed to, but that does not mean there is no recourse to unreasonable terms. Simply because you sign a contract does not mean all the provisions of the contract, or the contract itself, is enforceable. Go open a contracts book and you will see instances where courts have thrown out damage clauses because they were not a reasonable estimate of what damages actually would be. The standard of proof is high and it is a difficult case to make but it can be done. But you would need to do a class action suit to make it worthwhile since there would likely only be minimal damages to each individual person.

“Please point out to me how my post illustrates why disproportionate fees are necessary.”

Simple. You claim that banks paying for overdrafts is no big deal. The legislation being proposed, which you appear to support, limits the banks to assessing an overdraft fee to SIX PER YEAR. So if Joe consumer takes a little loan from the bank 20 times a year to pay his overdrafted charges, the bank is just supposed to suck it up? How the hell is that fair?

“I’m aware that the contract is agreed to, but that does not mean there is no recourse to unreasonable terms.”

As I noted, there is indeed – you go to another bank. Or, and I know this is a stretch, you take responsibility and DON’T OVERDRAFT ON YOUR ACCOUNT! Funny how you don’t hear Mr. Dodd screaming about fees for paper checks, fees for money orders, fees for wire transfers, or fees for online transactions. But, of course, these are things that consumers are happy to pay for. Only when consumers are irresponsible and are forced to pay for it is there ever legislation involved.

“But you would need to do a class action suit to make it worthwhile.”

Excellent. Instead of letting the market play this out as it should, let’s pad the wallets of attornies and spend down the revenue of banks, which will lead to fewer mortgages, less credit, and – you guessed it – more fees. Brilliant!

Lower penalties and/or limiting the number of times in a year a bank can enforce penalties will NOT reduce the instances, but in fact will most likely significantly increase the problem, meaning the bank and those customers who are responsible enough to maintain sufficient funds are the ones who suffer. As Zeke points out, the penalty is meant to deter the problem. It’s not as if these occurrences don’t cost the bank money in personnel time that could and should be used for other purposes.

This is typical of how Congress thinks – ignore the real problem, pretend to help “the little guy,” enable irresponsible behavior, use other people’s money to pay for it all. Just like, as I pointed out earlier, every other stupid idea the minions of satan in Congress have.

What’s wrong with expecting people to take some responsibilityfor their actions? Don’t like the fines? Don’t overdraw.

“Where does the money come from when irresponsible bank account holders are allowed to make a transaction despite having insufficient funds?”

Great point, Todd. But this line of thinking does more to validate the anti-fee argument than to support fees. The point is banks “allow” customers to make multiple purchases when over their balance which then result in multiple fees. They do this because there is a compelling profit motivation to do so.

In essence, the bank makes a short term loan to the customer and then adds a $40 processing charge for that loan. However, in almost all cases, the consumer is unaware that their balance is insufficient to cover the charge and are therefore taking out this expensive loan without realizing it.

There is absolutely no reason that consumers shouldn’t be notified that there account is insufficient to cover the transaction and be given the choice when making a purchase to say either “yes, I need this 6 pack so badly that I’m willing to pay a $40 fee on top of the price of the beer” or decide “hey, I don’t need this that badly.”

This is certainly not an unreasonable thing to ask.

“There is absolutely no reason that consumers shouldn’t be notified that there account is insufficient to cover the transaction and be given the choice when making a purchase”

Really? Tell me, how would you implement such an “unreasonable” system? The debit card is swiped and the merchant issues the charge to VISA or Mastercard, which does not have the capability to verify a customer’s account balance before it posts the charge to the bank. Is the merchant supposed to wait while VISA tracks down the bank and verifies the account balance? That seems a lot more “reasonable” than the customer keeping tabs on his balance. /sarcasm

The solution isn’t legislation or yelling at the banks. Check your own balance before you leave the house, take into consideration things you’ve bought that haven’t posted yet, and don’t spend more than you have. Duh!

No,

It’s not unreasonable to expect adults to keep track of their own finances, either. It would most likely be cost prohibitive for banks to be able to notify every debit card holder at every POT that they have insufficient funds to cover a transaction.

Zeke-
Show me where I said it isn’t a big deal to overdraft.
I did not say I support the proposed legislation in its entirety. I can see where you would make that assumption though. I would agree that limiting the fees to 6 times a year is a bad idea.
Dodd isn’t arguing about fees for checks, balance transfers etc because they aren’t disproportionate.
Regardless of Dodd’s feelings on the issue I am fine with penalizing these people, but the fines should be proportionate to the damage to the bank and banks should stop practices that allow them to ratchet up the fees:
link

“It would most likely be cost prohibitive for banks to be able to notify every debit card holder at every POT that they have insufficient funds to cover a transaction.”

Cost prohibitive? Really? In this day and age? Do you REALLY believe that? I guess I can see where your coming from. It isn’t like the banking system just received trillions of my tax dollars to cover “their” mistakes. How dare we consumers ask for reciprocity?!

It is predatory lending dressed up to look like a consumer service.

Predatory lending? This doesn’t fall under any definition of lending I’ve ever heard of.

Todd-
If you think it about it, it is pretty much predatory lending. The bank essentially loans you the money that you put on the ATM card that is in excess of your account. In exchange they charge you $30 a day and whatever other fees that come along.
It’s obviously not a traditional definition of a loan, but to a large extent it is just that.

“Predatory lending? This doesn’t fall under any definition of lending I’ve ever heard of.”

What would you call it then? The bank provides THEIR money to a merchant on YOUR behalf. If it looks like a duck and it quacks like a duck…

No,

I’d call it irresponsible money management on the part of the account holder.

“What would you call it then? The bank provides THEIR money to a merchant on YOUR behalf.”

I’d call it a valuable service provided by the bank for a fee. Keep in mind that they do not have to provide overdraft protection at all.

Perhaps what the bank needs to do is end any kind of overdraft protection and let VISA and Mastercard go after people. I’m sure that people would quickly beg banks to put it back in place and pay whatever they wanted after a few calls from VISA and a ruined credit score.