06/24/2013

Ripoff or fair deterent?

Why, then, do consumer groups get so hopping mad over bank fees mainly overdraft charges on checking accounts? After all, consumers have a dandy way to avoid such fees: Dont bounce checks. 

The consumerists were at it again, after the Consumer Financial Protection Bureau recently released its report on overdrafts. The federal agency found that bankers love their absent-minded customers. Overdrafts accounted for 61 percent of fees collected on checking accounts. 

Most of that is pure profit for bankers. If a customer doesnt make up the overdraft, the bank has to eat the loss. But such losses make up just 14 percent of overdraft fees. 

Consumer groups call on the government to rescue us from our own dunderheadedness. Consumers, particularly those who frequently have low account balances, need to be able to pay bills, buy groceries and conduct everyday transactions without punitive, frequent and unfair fees, said Tom Feltner, director of financial services at the Consumer Federation of America. 

The consumerists want banks limited to six overdraft charges a year. They also want a ban on a sneaky practice that some banks use to actually increase check bouncing. 

Do we want to let capitalism work or not? asks Joe Stieven, longtime bank analyst at Stieven Capital Advisors in St. Louis. Regulations passed since the financial crash are already costing bankers a bundle, he says. 

Meanwhile, banking here is highly competitive. Nearly 140 commercial banks have branches in the St. Louis area, along with dozens of savings banks and credit unions. If your bank makes you mad, pick another bank, he says. 

When a customers account runs dry, a bank can either refuse to honor his checks and debit card, or cover them and wait for the customer to pay up. Either way, the bank charges a fee, averaging $35. 

The size of that hit makes even payday loans look like a bargain, as payday lenders often point out.We are one of the leading manufacturers of chipcard in China Their typical payday charge $17 for a two-week loan of $100 can be cheaper than bouncing a check. 

The consumerists had an easier time making their case three years ago. Bankers then were gorging themselves on overdrafts set off by debit card use. Consumers seem to have a harder time keeping track of money when using plastic than when writing checks. 

Customers complained of big charges for penny-ante overdrafts. One of my fellow reporters freaked out when he found that several 99-cent iTunes purchases,Large collection of quality cleanersydney at discounted prices. made by his son, had cost him more than $30 each in overdraft fees. 

Congress in 2010 decided that banks couldnt charge for debit card overdrafts unless consumers consented in advance, although they could still charge for overdraft checks. Those that dont consent find their cards refused at cashiers counters when checking accounts are empty. 

Most consumers dont consent, and as a result, banks profits from overdrafts have been coming down. The average account holder saved $20 in 2010, although frequent overdrafters saved a lot more. 

To lure people into consenting, most banks offer overdraft protection plans. Fees often run about $10 per overdraft, plus interest and possibly other fees if the deficit is not made up quickly.Large collection of quality cleanersydney at discounted prices. Customers can cover the overdraft through an automatic link to a savings account or a credit card. 

Richard Cordray, director of the Consumer Financial Protection Bureau, is skeptical of those programs. What is often marketed as overdraft protection may actually be putting consumers at greater risk of harm, he said. 

A quarter of customers have at least one overdraft a year.Choose from the largest selection of cableties in the world. But a few people have a lot, and thosYou can make your own more powerful iphoneheadset.e are the people who worry consumer advocates. They tend to be lower-income people with small checking balances, which makes it easier to overdraft. They can least afford the fees. 

When tallying up the transactions of the day, nearly all banks add in deposits before they subtract debits, the Consumer Financial Protection Bureau found. That tends to hold down the number of bounces. 

But they differ widely in how they subtract the debits. Some subtract the biggest checks first. That tends to make a lot of little checks bounce, at $35 a pop, when the account runs dry. Thats Bank of Americas policy, according to its website. 
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