Debate over overdraft fees has been simmering for months, but at last the momentum seems to be shifting toward customers, prompting liberals to pump their fists in celebration. Sen. Chris Dodd is championing a bill to introduce new rules for overdraft fees that would require banks to notify customers when they've dipped below their account balance--before slapping them with huge fees. At the same time, some banks have taken steps to curb the practice before legislators force their hand.
As the overdraft-fee debate heads toward resolution, critics and supporters offer final reactions:
- Fees Only Legal Because of the Financial Lobby, writes Kevin Drum at Mother Jones. "[S]eriously, ask yourself this: what does it say about the power of the finance lobby in America that this was ever legal in the first place?...It's outrageous that banks should be allowed to charge fees that amount to 1000% interest rates on a short-term loan; it's outrageous that they should be allowed to reorder your debits to make you pay more of these fees than you should; it's outrageous that they should be allowed to charge multiple fees per day in the first place, since they're essentially just making a single loan; and it's outrageous that they should be able to do this whether you want them to or not."
- But Fees Prevent Bounced Checks, suggests Lita Epstein at Daily Finance. "Many banks allow customers to avoid these charges if they've made arrangements to link the account to an existing savings account or credit card for overdraft protection. But if the customer has made no such arrangement, the bank assumes the customer would prefer to pay the overdraft fee rather than have the payment 'bounced' back for insufficient funds."
- Overdraft Not Essential to Banks, writes Felix Salmon at Reuters. "[J]ust because a bank currently has more overdraft revenues than it makes in profits does not mean it'll fold in the event those revenues go away." Salmon argues that people who want overdraft protection should be charged: "Would implementing this drive thousands of banks into insolvency? No. But it would make banking much less expensive for the people who can least afford to pay huge fees for it."
- Consumers Should Take Responsibility, says Morgan Housel, outlining the main objections at right-leaning Townhall. "[S]ince customers are spending more money than is in their accounts, these aren't 'fees' for service. They're punishments for screwing up, just like the fees you expect for not paying your taxes, forgetting to pay your phone bill, or being drunk in public. I'd love to be able to opt out of getting parking tickets when I forget to move my car on street-cleaning days, but someone feels it's necessary to charge me $74 for doing so. That's just how life works."
The announcement yesterday by the Bank of America and JPMorgan Chase that they would end some of their most egregious abuses in the overdraft check protection racket is a press victory, plain and simple. [T]he financial press, bloggers, personal finance writers, not to mention our own Ryan Chittum, have been shining a light, beating the banking industry about the face and neck, on its sneaky and deceptive post-crash post-bailout practices since at least April. It takes a lot to embarrass too-big-to-fail banks, but apparently public opinion still counts for something.