What has happened to personal accountability?

Sorry but this post is going to be political. As a bank employee (along with a majority of the women in my family in banking), I am deeply disturbed by legislation that is currently in the Senate Banking Committee. Here is the press release from senate.gov (along with several of my comments that refer to the specific bank that I work for and our practices):
DOOD, REED, SCHUMER, BROWN AND MERKLEY UNVEIL BILL TO PROTECT CUSTOMERS FROM ABUSIVE CHECKING ACCOUNT OVERDRAFT FEES. October 19, 2009 WASHINGTON – Today, Senate Banking Committee Chairman Chris Dodd (D-CT) will file The Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act, a bill to protect Americans from excessive checking account overdraft fees.  Senators Jack Reed (D-RI), Chuck Schumer (D-NY), Sherrod Brown (D-OH), and Jeff Merkley (D-OR) are original co-sponsors of the bill. “At a time when many can afford it least, American consumers are being hit with hundreds of dollars in penalties for overdrawing on their account by just a few dollars.  Banks should not be trying to bolster their profits at the expense of their customers,” said Dodd. “This legislation gives Americans control over their bank accounts – giving them the chance to choose whether they want overdraft protection, establishing strict limits on these fees, and shining more light on these practices.” “Overdraft charges on debit cards are often deceptive because most people never asked for overdraft protection and logically assume they can only spend money they have. So because the consumer doesn’t know their balance, when they spend too much money they shouldn’t be penalized? How is ignorance granted a free pass?  The FAIR Overdraft Coverage Act will give consumers more choices and prohibit banks from levying excessive, hidden fees on individuals and families who are struggling to keep their homes and jobs,” said Reed.  “Overdraft protection is billed as a customer service, but it is actually anything but. The bottom line is, debit cardholders are getting scammed by their banks. Um hello… rich Senate dude. If the bank doesn’t pay the check- it is returned to the merchant with a higher fee than most bank NSF fees. Is that better customer service and better financially than the bank’s fee? Families across the country are being involuntarily placed in these overdraft loan programs and getting ripped off by excessive fees. I beg to differ. Bank disclosures are highly regulated and my bank clearly discloses the amount of overdraft protection and any fee associated with it. The customer can decline the service at any time but it’s funny- not many people do… remember that whole merchant returned check fee? Right.  It’s time to stop this practice dead in its tracks.  This crackdown on overdraft policies is overdue,” said Schumer. 

“Taxpayers helped stabilize the financial services industry – big banks should not return the favor by slamming consumers with billions of dollars in overdraft fees. In Ohio alone, it’s estimated that consumers paid nearly $900 million in overdraft charges last year. This is about putting consumers first,” said Brown.  Again, who forced these people to spend more than what is in their account? I think financial responsibility is what the Senators should be focusing on and not penalizing banks.

“With these stealth overdraft fees (not very stealthy when the customer is immediately mailed a notice the day of NSF activity and receives a monthly statement) , banks reach in and take money out of the wallets of hardworking Americans,” said Merkley.  “These fees are not transparent, they’re not fair, and they need to end.” This statement is absurd!

So-called “overdraft protection programs” enable customers to overdraw their accounts, without their knowledge (Is it not their fault because the public school system failed them and they can’t do simple math? If you start with a $100 in your account and you spend $150, you go in the negative, it’s simple), when they make debit card purchases, electronic transfers, ATM withdrawals or use checks.  Account holders are often enrolled in the programs without their consent and many banks will slap customers with fees of upwards of $30 for this “courtesy” even if their account is only overdrawn by a few cents.  I happen to work for a bank with the lowest NSF fees in the state so I can brag here to say that the most a customer will pay is $17.43. However, even on a higher NSF fee, it is still generally cheaper than the merchant’s returned check fee.)

 Some banks maximize penalties by processing larger purchases first, draining accounts faster and creating the potential for multiple fees on multiple smaller purchases.  (Dirty but still how is this the bank’s responsibility? The customer spent the money.)Even on debit card or ATM transactions, banks do not notify the customer when they are withdrawing against insufficient funds. (With the invent of automated phone information lines, ATMs, online banking and monthly statements, customers have no excuse not to know their own balance and spend money accordingly.)  As a result, a few small purchases can result in hundreds of dollars in fees before a customer is notified. The FAIR Overdraft Coverage Act will rein in abusive fees, give customers greater choice, and bring greater transparency to these programs. The bill would:

·         Require banks to get a customer’s consent before enrolling them in an overdraft protection program for ATM and debit card transactions; (Fine, I promise that when they understand the merchant’s returned check fee as well as difficulties in writing checks in the future at stores due to those returned checks placing the customer’s info a hotlist, most will opt-in)

·         Limit the number of overdraft coverage fees banks can charge to one per month and six per year; (If you do this, no bank will offer overdraft protection. There will be no incentive and no customers will be able to go into the negative ever. All checks will be returned to merchants who will then stop accepting checks and the house of cards falls apart.)

·         Require fees be proportional to the cost of processing the overdraft; (Fine)

·         Stop institutions from manipulating the order in which they post transactions in order to rack up extra fees; (Not a problem, we post ours in serial number order already)

·         Require customers be notified when they overdraw their account and be given the option of being notified by email, text or traditional mail; and (NSF notices are mailed the day of activity. Email and texts are not secure this will most likely violate the Privacy Act but I’m not sure how this will play out.)

·         Require that customers be warned if an ATM or branch teller transaction will overdraw their account, and be given the chance to cancel the transaction. (Due to pending debit activity initiated prior to an ATM or branch teller transaction, this may be impossible to do 100% of the time. It all depends on credit card merchant processor speeds, tips added to services rendered, etc)

 Moeb’s Services reported that banks stand to collect a record $38.5 billion in fees for customer overdrafts this year.  The most cash-strapped customers are the hardest hit (That’s because it is the poorest people who are willing to “borrow” money using ODP~ and pay the fee associated), with 90 per cent of overdraft fees coming from 10 percent of checking account holders.(Habitual ODP users are not going to be the customers “opting out”)  According to the Center for Responsible Lending, banks collect nearly $1 billion per year in overdraft fees from young adults and $4.5 billion from senior citizens. 

Last month, five days after Dodd announced he was drafting this bill, three of the nation’s largest banks – J.P. Morgan Chase, Bank of America, and Wells Fargo announced moderate changes to their overdraft coverage programs.  In June, Chairman Dodd wroteFederal Reserve Chairman Ben Bernanke, asking the Fed to require banks receive customers’ permission before enrolling them in “overdraft protection programs,” similar to the “opt-in” approach to over-the-limit fees for credit cards that Dodd included in the Credit CARD Act.

I think this bill is ridiculous. I’m sure there are banks that take advantage of customers with exorbitant fees and something should be done about that. But this bill is not the answer and I think shows an ignorance on the Senator’s part to propose this bill. A person can go their entire life and not pay the bank a penny. It’s all up to personal responsibility and not the government to determine.

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