Federal Reserve Says Banks Can Continue Overdraft Plans<\/a>.\"<\/p>\nThat sounds pretty dry until you read beyond the headline:<\/p>\n
The 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.<\/i><\/p>\n
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. \u2026<\/p>\n
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.<\/p>\n
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.<\/p>\n
Getting hit with a $25 fee for every transaction would make one extremely cautious about monitoring the balance on one's debit card \u2014 which is why the banks running this scam take care to misrepresent that balance and thereby encourage more overdrafts:<\/p>\n
The Federal Reserve proposal also does not bar banks from programming their A.T.M.'s to display a balance that includes both the amount available under the overdraft program and the consumer's own balance without distinguishing between the two. For example, some banks tell a person with $100 in his account that he has an \"available balance\" of $400, including a $300 overdraft program. They then charge an overdraft fee for any withdrawal of more than $100.<\/i><\/p>\n
This isn't nickel-and-diming, this is $15-$35 a day from people who are only taking home $60-$70 a day to begin with.<\/p>\n
Here again it's helpful to ask the question WWGBD? \u2014 what would George Bailey do? Bailey is, of course, the hero of Frank Capra's It's a Wonderful Life,<\/i> played by Jimmy Stewart. His nemesis is the avaricious banker Old Man Potter (Lionel Barrymore). Nearly all policy disputes in America can be viewed in terms of the clash between George Bailey and Old Man Potter.<\/p>\n
But as heartlessly predatory as Old Man Potter was, he never dreamed of anything like this \"overdraft privilege\" scam:<\/p>\n
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><\/p>\n
One consultant has advised banks to maximize the fees by opening branches \"in supermarkets, particularly supermarkets with a middle to down market and a family target market.\" \u2026<\/p>\n
Washington Mutual, the largest financial institution to promote bounce protection programs, \u2026 charged customers more than $1 billion in overdraft fees last year, industry analysts estimate.<\/p>\n
One bank in one year transferred $1 billion directly from the accounts of \"middle to down market\" families and into its own coffers. And they called it a \"privilege\" and a \"service.\"<\/p>\n
And our unelected leaders at the Federal Reserve have given this practice their blessing.<\/p>\n
They sit around there and they spin their little webs and they think the whole world revolves around them and their money. Well, it doesn't. In the whole vast configuration of things, I'd say they were nothing but a bunch of scurvy little spiders.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
Buzzflash is angry. This isn’t anything new \u2014 the hyperpartisan Drudge alternative is always angry. They tend to make Lewis Black seem mellow. Yet even by Buzzflash standards, this seemed to stand out: Despicable: Fed Reserve Says Banks Can Continue to use Hidden or Delayed Notice Overdraft Charges to Rip-Off “poor and middle-income people;” Rich […]<\/p>\n","protected":false},"author":111,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-782","post","type-post","status-publish","format-standard","hentry","category-class-warfare"],"yoast_head":"\n
WWGBD?<\/title>\n<meta name=\"description\" content=\"Buzzflash is angry. This isn't anything new -- the hyperpartisan Drudge alternative is always angry. They tend to make Lewis Black seem mellow. Yet\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.patheos.com\/blogs\/slacktivist\/2004\/06\/10\/wwgbd\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"WWGBD?\" \/>\n<meta property=\"og:description\" content=\"Buzzflash is angry. This isn't anything new -- the hyperpartisan Drudge alternative is always angry. They tend to make Lewis Black seem mellow. Yet\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.patheos.com\/blogs\/slacktivist\/2004\/06\/10\/wwgbd\/\" \/>\n<meta property=\"og:site_name\" content=\"slacktivist\" \/>\n<meta property=\"article:published_time\" content=\"2004-06-10T14:56:42+00:00\" \/>\n<meta name=\"author\" content=\"Fred Clark\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fred Clark\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.patheos.com\/blogs\/slacktivist\/2004\/06\/10\/wwgbd\/\",\"url\":\"https:\/\/www.patheos.com\/blogs\/slacktivist\/2004\/06\/10\/wwgbd\/\",\"name\":\"WWGBD?\",\"isPartOf\":{\"@id\":\"https:\/\/www.patheos.com\/blogs\/slacktivist\/#website\"},\"datePublished\":\"2004-06-10T14:56:42+00:00\",\"dateModified\":\"2004-06-10T14:56:42+00:00\",\"author\":{\"@id\":\"https:\/\/www.patheos.com\/blogs\/slacktivist\/#\/schema\/person\/0173c85e46e7e0951fef5752bed78b6e\"},\"description\":\"Buzzflash is angry. 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