Overdraft fees should be looked at as a lending practice... 3000% interest anyone?

[PA Democrat]

Banks' 'courtesy' loans at soaring rates irk consumers

http://www.usatoday.com/money/perfi/credit/2009-07-08-banks-overdraft-fees_N.htm

Even as regulators crack down on abusive mortgage and credit card practices, another type of lending threatens to mire consumers in a credit trap.

<snip>

Eric Halperin of the Center for Responsible Lending says regulators should examine bank overdraft rules because they "parallel" much-criticized card policies. Banks are raising fees and imposing similar policies on checking accounts and credit cards, such as charging more for multiple transgressions. The Federal Deposit Insurance Corp. says if banks cover a $20 purchase and charge a $27 fee, the loan has a 3,520% annual percentage rate (APR) if paid back in two weeks.

Senate Banking Committee Chairman Chris Dodd, D-Conn., said if the Fed doesn't curb overdraft abuses, he'll "pursue legislative action." Rep. Carolyn Maloney, D-N.Y., has sponsored legislation requiring banks to get consumers' permission to cover overdrafts, disclose APRs and pay transactions in a way that doesn't increase fees.

Banks are lobbying heavily against restrictions. Why? "Overdraft fees are the mother lode of (deposit) fees," says Michael Moebs of Moebs Services, an economic research firm. "If it weren't for overdraft fees, 45% of banks and credit unions wouldn't have made money in 2008."

[SleeplessInAlabama]

1. Makes sense to me...

It is, after all, a cash advance.

[county worker]

2. I'm old enough to remember when banks paid you interest on your checking account.

They were called demand deposits. The money was owed to the account holder. The banks invested the money in overnight markets and made interest on the money. They didn't pay you all the interest they earned though.

[MercutioATC]

3. Simple solution: Don't spend money you don't have.

There's a flat bank fee for overdrawing an account...usually $25-$35.

If I overdraw my account by a penny, I STILL have overdrawn my account and the bank has the right to charge the fee that I CONTRACTUALLY agreed to pay.

[anonymous171]

4. You should have to opt for overdraft protection, instead of having to opt out,.

Bankers are scum and they deserve every punishment and regulation the Feds can slap on them.