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News & ArtsWednesday, June 3, 2009
Economy The Essence of Fees
Posted by Charles Mudede on Wed, Jun 3, 2009 at 7:49 AM
The LAT reports:
The California Supreme Court unanimously overturned a billion-dollar class-action award against Bank of America Corp. on Monday, ruling that banks can collect overdraft fees from accounts in which government benefits intended for subsistence are directly deposited.This is the war of our day: banks versus the multitude. And the banks will continue winning if the multitude fails to find a real alternative to the current banking and the credit system.The ruling threw out a 2004 verdict by a San Francisco jury that found the bank violated state law by taking fees for insufficient funds from accounts set up to receive Social Security benefits.
The bank customers who had stood to benefit from the award included 1.1 million California residents receiving government assistance. James C. Sturdevant, who represented the Social Security recipients, said the award, with interest, would have cost Bank of America more than $2 billion.
2
It's great that you posted this. Giffy's "you could just not overdraft your account" while easy to understand fails to consider how banks manipulate these things. First, when you make multiple purchases a day they will deduct from your account the largest charges, thereby allowing them to charge $35 for multiple overdrafts. Second, the bank could easily just not allow you to overdraft the account at the point of sale. Instead, they involuntarily sign you up for "overdraft protection" to save you the embarrassment of having your debit card denied in front of a cashier. Sometimes it's hard to know exactly what's in your bank account, because of delay in having checks approved or because of automatic withdrawals. In the end, this punishes the most vulnerable of our society who don't have any cushion in their bank accounts. Moreover, many of the people who receive Social Security Disability Insurance (SSDI) don't have the mental capacity to properly balance a checkbook; thus, our public funds are being sent to the banks and not to the disabled people who need it to survive.
3
I think the banks already proved they own congress and the White House. This proves they own the courts as well. Sie la vie.
4
@2 - That's what everybody says, but sometimes it's easier said than done. The problem is that the bank honors transactions once the account is negative and just charges you $35 a pop for each negative transaction. I understand that it may cost the bank money to cover charges for a short time until a depositor can put in more cash, but $35, really? I refuse to believe that BoA incurs a $35 dollar loss on each negative transaction.
Say I have $10 dollars in my account, I get a burger at the bar that costs $10.01. For that $.01 that I don't have, the bank charges $35. Are they really incurring $35 worth of risk buy covering that $.01? What about the average risk across all customers. While I understand that it likely does cost them something to cover overdraft transactions, I seriously doubt that cost is anywhere near $35, it's probably more like $5.
The fact is that BoA and other have been treating overdraft charges as a profit center for years now, and I happen to think that's unconscionable. Charging massive fee to the exact demographic has the most difficulty paying for them is nothing but exploitation.
Say I have $10 dollars in my account, I get a burger at the bar that costs $10.01. For that $.01 that I don't have, the bank charges $35. Are they really incurring $35 worth of risk buy covering that $.01? What about the average risk across all customers. While I understand that it likely does cost them something to cover overdraft transactions, I seriously doubt that cost is anywhere near $35, it's probably more like $5.
The fact is that BoA and other have been treating overdraft charges as a profit center for years now, and I happen to think that's unconscionable. Charging massive fee to the exact demographic has the most difficulty paying for them is nothing but exploitation.
5
@2 I use BoA and I have never seen them do the largest items first. The seems to go in chronological order. Even still, keeping you account above zero renders that irrelevant.
I am also not so sure simply denying things at the point of sale is as easy as you say. Charges do not post instantly, nor do checks clear right away. They will deny you once its clear your in the red, but its often that it goes negative after things clear.
Ok, fair enough on people who are mentally disabled. Though I am not sure that someone who cannot balance a checkbook, a relatively easy task, should be managing there own money, but having help might not be possible in all cases. Is this even about SSDI or just regular social security? The article doesn't mention disability. Even still I am not sure its the banks responsibility to assess the mental competency of its customers. Perhaps we need more organizations and assistance to help these people handle their accounts.
It seems that people love to bitch about bank fees when almost all of them are pretty easy to avoid. Don't overdraft your account, don't use ATM's from other banks, don't bounce checks. Or if your bank is fucking you, go to another, or to a credit union.
I am also not so sure simply denying things at the point of sale is as easy as you say. Charges do not post instantly, nor do checks clear right away. They will deny you once its clear your in the red, but its often that it goes negative after things clear.
Ok, fair enough on people who are mentally disabled. Though I am not sure that someone who cannot balance a checkbook, a relatively easy task, should be managing there own money, but having help might not be possible in all cases. Is this even about SSDI or just regular social security? The article doesn't mention disability. Even still I am not sure its the banks responsibility to assess the mental competency of its customers. Perhaps we need more organizations and assistance to help these people handle their accounts.
It seems that people love to bitch about bank fees when almost all of them are pretty easy to avoid. Don't overdraft your account, don't use ATM's from other banks, don't bounce checks. Or if your bank is fucking you, go to another, or to a credit union.
6
@4 No one is forcing them to use bank of america, nor even to use a debit card. It is possible to use checks to pay bills then pay for everything else in cash.
7
Keep records. Don't overdraw your account. Voila. If you don't have the mental capacity to keep a checkbook, those around you, not the bank, are failing you. Getting your balance from an ATM receipt instead of your checkbook will almost always screw you eventually.
8
Well shit if it's wrong we all know you have to have govt. regulation to prohibit it.
Yes, you have to assume entities designed to make a profit will you know, try to make a profit.
Trying to shame them into things does not work. So if it wasn't in their contract with depositors and it wasn't in regulations the answer is for the fucking government to step in and resolve this thru regulation -- not judges making up what might be viewed as generically fair. How can the court go one and one and figure out which customer is mentally disabled and which ones are only physicially disabled, that would be insane!
Yes, you have to assume entities designed to make a profit will you know, try to make a profit.
Trying to shame them into things does not work. So if it wasn't in their contract with depositors and it wasn't in regulations the answer is for the fucking government to step in and resolve this thru regulation -- not judges making up what might be viewed as generically fair. How can the court go one and one and figure out which customer is mentally disabled and which ones are only physicially disabled, that would be insane!
10
The law was very ambiguous about whether the banks had a right to do this. The California Supreme Court held that taking money from your checking account to pay for a past-due credit card was illegal. So the questions was whether the statute prohibited these kinds of adjustments within the same account.
It is really easy to say "go to another banks," but the fact is that most of these standard form adhesion contracts are the same. Going across the street to Wells Fargo means you get the same binding arbitration, the same "over draft protection, " the same ban on class actions and the same fees that bear no relation to the costs incurred by the bank for the "service" they are providing.
Giffy, you should know the banks only adjust the order of deposit when you have overdraft fees; they do it time-wise order otherwise.
As to the disabled question, the solution is to give the consumer the option when they sign the deposit agreement about whether they want the overdraft protection--not just to make it the default rule in order to get fees. As to whether these people should have checking accounts, mental illness/disability is not an either/or proposition. Many people are able to mostly handle their affairs, but cannot do certain things. There are representative payee services out there, but not all people have access to them and many charge fees to people getting less than $700 a month.
Finally, there's the issue of illiteracy. Many folks, through no fault of their own, never got any schooling, whether they be older African Americans from the South or Latino pickers from the border states. Who has the better to bear these cots? I submit the banks, who should (at the very least) charge only a reasonable fee for this service instead of $35 if you are--literally--over drafted by one penny.
More...
It is really easy to say "go to another banks," but the fact is that most of these standard form adhesion contracts are the same. Going across the street to Wells Fargo means you get the same binding arbitration, the same "over draft protection, " the same ban on class actions and the same fees that bear no relation to the costs incurred by the bank for the "service" they are providing.
Giffy, you should know the banks only adjust the order of deposit when you have overdraft fees; they do it time-wise order otherwise.
As to the disabled question, the solution is to give the consumer the option when they sign the deposit agreement about whether they want the overdraft protection--not just to make it the default rule in order to get fees. As to whether these people should have checking accounts, mental illness/disability is not an either/or proposition. Many people are able to mostly handle their affairs, but cannot do certain things. There are representative payee services out there, but not all people have access to them and many charge fees to people getting less than $700 a month.
Finally, there's the issue of illiteracy. Many folks, through no fault of their own, never got any schooling, whether they be older African Americans from the South or Latino pickers from the border states. Who has the better to bear these cots? I submit the banks, who should (at the very least) charge only a reasonable fee for this service instead of $35 if you are--literally--over drafted by one penny.
11
I have to agree with the above commenters--if people can't keep their accounts in order, they deserve to pay a fee or perhaps shouldn't be managing their own money/we need to have services to help them do so. I do think schools need to teach money management much better than they do currently, though of course it is hard if kids have bad models of spending/account management to learn from at home. In any case, at some point people need to grow up and take some responsibility. No one forced them to have a debit card, after all! If you don't like the overdraft charge and you can't manage to keep from overdrafting your account, you can easily use any other option: cash, credit cards, prepaid debit cards, etc. (And don't get me started on how "predatory" credit card companies are. I've never paid a cent to a credit card company, and it's really easy: pay your bills on time, and don't spend more than you have! Though I suppose if people could manage to follow this rule, they wouldn't be overdrafting their accounts in the first place...)
And @4:
a) Why shouldn't companies try to make a profit? They're a business. If you don't like it, you can probably find a credit union that does not do overdraft protection.
b) Actually, you have no information on how much it costs a company to cover overdrafts. We also don't know the unintended consequences of lowering the overdraft fee to $5. I would guess that part of that $35 fee is to deter people from overdrafting their account. I know for sure that if it were a pretty meaningless fee like $5, I might think a little less about transferring $$ around to make sure checking is always over $0...I would guess that if you lowered this fee, people would use the overdraft option a lot more, which would potentially be very costly.
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And @4:
a) Why shouldn't companies try to make a profit? They're a business. If you don't like it, you can probably find a credit union that does not do overdraft protection.
b) Actually, you have no information on how much it costs a company to cover overdrafts. We also don't know the unintended consequences of lowering the overdraft fee to $5. I would guess that part of that $35 fee is to deter people from overdrafting their account. I know for sure that if it were a pretty meaningless fee like $5, I might think a little less about transferring $$ around to make sure checking is always over $0...I would guess that if you lowered this fee, people would use the overdraft option a lot more, which would potentially be very costly.
13
Credit card companies are predatory in many circumstances: double billing in a cycle, universal default, changing contract terms, retroactive changing of interest rates, having due dates at 11:00 AM in the morning, sitting on checks to get overdraft fees.
Some people actually carry balances because of medical or other emergencies (yes there are profligate spenders, too). It's nice that some people manage to pay their balances off every month, but many people can't. I have had many elderly clients whose husbands died, they never learned money management and half of their income just went away and they have burial expenses.
You must have debit and credit cards to participate in the modern economy.
It doesn't cost the banks much money to do overdraft, indeed they encourage and make a ton of profit!
http://www.nytimes.com/2003/01/22/busine…
Some people actually carry balances because of medical or other emergencies (yes there are profligate spenders, too). It's nice that some people manage to pay their balances off every month, but many people can't. I have had many elderly clients whose husbands died, they never learned money management and half of their income just went away and they have burial expenses.
You must have debit and credit cards to participate in the modern economy.
It doesn't cost the banks much money to do overdraft, indeed they encourage and make a ton of profit!
http://www.nytimes.com/2003/01/22/busine…
14
@13 The solution to that is universal health care and perhaps some sort of low-interest loan program for people in genuine emergencies, not a blank check for everyone to spend irresponsibly with the rest of us subsidizing them.
I agree, you do need some sort of "card", at least to buy online (everything in person/mail can be done with cash or check)...BUT there is still the option of a prepaid Visa card (seems like a lot of parents do this with teens to help them learn the ropes without so much risk) if a person really knows they can't handle debit/credit cards.
I agree, you do need some sort of "card", at least to buy online (everything in person/mail can be done with cash or check)...BUT there is still the option of a prepaid Visa card (seems like a lot of parents do this with teens to help them learn the ropes without so much risk) if a person really knows they can't handle debit/credit cards.
15
@12, You hit the nail on the head. If I overdraft my BECU account, a day of interest on my line of credit usually runs me about $.08, compared to $35 per line item.
I have never had trouble accessing my account overseas and the international ATM fees are reasonable.
There is no logical reason to give money to the asshats at BofA.
I have never had trouble accessing my account overseas and the international ATM fees are reasonable.
There is no logical reason to give money to the asshats at BofA.
16
@7 - And that really gets to the heart of the matter here; the fact that banks have bent the rules as far as they can to screw the maximum amount of people out of the maximum amount of money. They have huge buildings full of lawyers trying to invent new ways to justify throwing fairness and regulation out the fucking window. I'm just a guy working a stupid day job, it shouldn't be my job to find the flaws in the contract these guys invent. This is why we have consumer protection laws, we just have politicians who don't keep them up to date. Because they're paid off by the banks.
Why can't you go by what on the receipt from the ATM? We live in a digital age where information transfer is instantaneous, if there's pending transactions, the bank knows how much they are. Why aren't they reflected on the account balance? It's because they *want* you to screw up, to think you have more money than you actually do so they can hit you up for $35 when it goes negative.
Why can't you go by what on the receipt from the ATM? We live in a digital age where information transfer is instantaneous, if there's pending transactions, the bank knows how much they are. Why aren't they reflected on the account balance? It's because they *want* you to screw up, to think you have more money than you actually do so they can hit you up for $35 when it goes negative.
17
We figured that one out ,Chuckles. It's called a credit union. Shouldn't you be waiting for the schoolbus to pick you up? The short one?
19
@18 - Nope, it's just that their platoon of lawyers haven't figured out a way to separate you from your money with a straight face or a clean criminal record, give it time, they will.
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