If we force banks to disclose that your purchase will cause an overdraft fee, 1000 banks will fail,

[The Straight Story]

Proposed Debit Card Regulations Could Cause 1,000 Banks and 2,000 Credit Unions to Fail
September 9th, 2009 • Related • Filed Under • by admin

Filed Under: Government and Legislation

New regulations that offer consumers additional rights and protections when using credit card have become law and are going into effect and now Congress will very likely focus on adding additional protections for users of checking accounts and debit cards.

In a recent press release, Rep. Carolyn Maloney (D-NY) described the legislation that she is drafting:

Now that credit card legislation has become law, Congress will likely focus on consumer protection related to checking accounts and debit cards. This NY Times article, Overspending on Debit Cards Is a Boon for Banks, looks at the overdraft issue and the bill introduced by Representative Carolyn Maloney, Democrat of New York. Her press release described the bill:

would require notice to customers at the ATM or point-of-sale terminal when a purchase is about to trigger an overdraft – and would give consumers at the transaction point a choice of whether to accept or reject the overdraft service and the associated fee and requires disclosure of the terms and charges associated with an overdraft program and an opportunity for account holders to opt in, rather than being automatically enrolled.

The legislation may have a major impact on banks as well as customers that never incur overdraft fees. According to Michael Moebs, an economic advisor for many banks and credit unions stated that Rep. Maloney’s legislation would effectively kill overdraft services, which could cause up to 1,000 banks and 2,000 credit unions to fold within the next two years. The reason for these potential failures is that 45% of banks collect more in overdraft fees than they make in profits. In a recent New York Times article, Moebs stated, “Will they be able to replace it with another fee?” Mr. Moebs said. “Not immediately and not soon enough.”

According to an FDIC report, NSF-related fees accounted for 24.8% of the total non-interest income earned in 2006.

Unsurprisingly, the banking industry vehemently opposes the legislation. Some banks have suggested they may need to add a $10 to $20 monthly fee on every “free” checking account to make up the revenue. Rewards from debit cards and rewards checking accounts would almost certainly be slashed as well.

http://www.americanbankingnews.com/2009/09/09/proposed-debit-card-regulations-could-cause-1000-banks-and-2000-credit-unions-to-fail/

[atreides1]

1. Banks are like drug addicts.

[imdjh]

5. It wouldn't be so bad if it were a little spank. Five bucks maybe. But $35 is too much.

[Skink]

2. ATM's always tell you if they are about to charge a fee.

I remember debit purchases getting declined in the not to distant past. When did they stop doing this?

[Engineer4Obama]

4. I remember this too

Its why I was so surprised when I got billed a few hundred dollars in overdraft fees. Needless to say I keep a rather large buffer in my bank account now.

[haele]

6. It's not the ATM owner's fee, it's the overdraft fee they're talking about.

I've usually seen an ATM owner's fee where they ask you if you are willing to pay an extra $.50 - $4 to use their ATM service. I have had debit purchases declined before everyone started getting "overdraft protection" for having direct deposit or regular salery over a certain amount a month. Which depending on your bank, "overdraft protection" can be anything from pulling from your savings, a generic fee for all overdrafts that day or cycle, or $15 - $75 per purchase.

If you are off even a few cents at point of purchase time, with some banks, even if you have deposited funds at your bank branch teller earlier that day and have the deposit slip showing your "available balance", the funds might not have "officially" been posted to your account until up to 12 business days according to the computer if it puts a hold on your account, and you will be hit by a overdraft fee every time you use the ATM. The teller's computer system is not necessarily linked to the ATM or the server that is in the fee processing center; I've had direct deposits not show up at my bank's ATM check, but when I went to a bank branch, the funds would be there.

If all the bank's computers are synchronized to the same accounting system, and you could be informed of your actual bank balance, including deposit holds, outstanding credit purchases or electronic checks that have not been pulled yet - and if and how much of an overdraft fee would be incurred before make the purchase. If you know you will be hit for $50 if you go over by twenty cents with that purchase, you aren't going to do it.

Seems the bank's fee processing computers can always figure out these things the instant any transaction is made; why can't the ATM or your "online ledger" page?

Haele

[G_j]

9. enough to make one consider

keeping their money in a mattress..

[imdjh]

3. Pity. nt

[Gin]

7. pretty sophisticated ATM receipts....now if we could only get paper voter

verification when voting.

[Metta]

8. Profit over the greatest good. Ah, the smell of greed in the morning.

Usury has long been a way of life for corporations and criminals. Sometimes, there isn't any difference.

[The Magistrate]

10. Then They Had Better Close Those Down Immediately, Sir: They Are Bankrupt

And incompetently run.

These people would make an old-style vigorish man blush....

[imdjh]

12. If the next generation isn't alcoholic and addicted, 40% of hospitals will close.

Feel free to add others.

[The Magistrate]

14. Are You Seriously Supporting This Swindle, Sir?

Interest rates annualizing to several thousand points are illegitimate, and if a bank depends on these for its claim to solvency, it has no business being in operation at all.

[imdjh]

21. No, I am saying that a business model which requires a dysfunctional customer will eventually fail.

While it's true that the dysfunctional tend to reproduce, over whatever period of time is required it is natural for the dysfunction or inferior to be eliminated either by force, attrition, or adaptation. The only discussion on disagreement with this truth is what is inferiority and what is simply difference.

[KamaAina]

26. If the next generation isn't undereducated, 40% of RW cable news channels and websites will close.

Bye-bye, FR! :hi:

[imdjh]

35. I've always thought those channels and websites catered to the stupid by nurture rather than nature.

[intheflow]

18. This is what I don't understand about banks.

The free market model that Repukes are so enamored with says if you can't run your business, you deserve to fail. But when you can't run your business ethically, you cry about "unfair" consumer protections and deserve a bailout. I really hate American business.

Nice to see you again, Sir! :hi:

[The Magistrate]

19. They Are No More Desirous Of a True Free Market, Ma'am, Than A Brawler is Of a Fair Fight

In Mr. Smith's 'Wealth of Nation', virtually every criticism he makes of 'government interference' in the economy is an attack on measures by the government to subsidize or support some business or trade, which he observes are always procured by machinations of the businessmen mentioned exerting undue influence on officials.

[TxRider]

31. Yup FDIC should close them today...

They are insolvent.

Even 90% of republicans would agree with that one...

An easy bipartisan agreement, go get em!

[SOS]

11. Incompetent banks are now little more than pickpockets

If these crooks can't make a profit by borrowing at 0.25% and lending at 18%, they deserve to fail.

[imdjh]

13. Now? Can you say "amortization" and "Rule of 78 loan"?

[grace0418]

15. So if they're not robbing you blind they'll shut down? That's super cool.

Dog I hate the banking industry.

[Vidar]

16. Most of them deserve to fail.

[ellie]

17. What a crap business model

this is.

[yowzayowzayowza]

20. I'm fine with being charged for servicing the account.

The convenience of online banking and atm access is a worthwhile value, but these overdraft fees are a racket.

[imdjh]

22. Are you fine with different customers paying different maintenance costs?

The customer who never goes into the bank, never calls, and uses no or few checks is the preferred customer assuming everything else (average daily balance type stuff) is equal. Should he pay the same maintenance fee as the customer who overdraws his account, who checks his balance at the bank or ATM frequently, and who requires staff attention?

[yowzayowzayowza]

29. Sure. If the bank finds it advantageous to differentiate ...

customers and the marketplace supports it, why not? :shrug: Why shouldn't I have access to a type of account that limits access to 'staff attention' and opts-out of overdraft protection for a flat maintenance fee? If you want a maintenance fee free account with overdraft protection, so be it. Whatz the prob?

[Lance_Boyle]

23. forget notification of "overdraft about to happen"

there must be SOME room for personal responsibility in this. BUT, definitely follow through on the part about making overdraft protection strictly opt-in. I believe that alone solves the problem.

[cbdo2007]

24. I doubt it...the people paying "overdraft fees" to begin with are so dumb they would still continue

to do the transaction even if they're going to be charged an extra $35 for it.

If they really cared about saving the $35 they would learn how to use a calculator and that thing at the top of their check book.

[SOS]

25. The whole point is to decline the sale at point of purchase

if the funds are insufficient or uncollected. That's what Rep. Maloney is fighting for.
77% of national banks do not allow the customer to opt out of this scam.

Example: You deposit a $1,000 check on Monday into an ATM at 2:15 PM.
Because you used an ATM and deposited after 2 PM, your funds will not be available for 2-3 days.
You must know every detail of the bank's collection policy if you live paycheck to paycheck.

On Wednesday morning you use your debit card 5 times while shopping.
The check is still uncollected!
You are now charged $175 for this "service".

It's not a question of smart or stupid.

Just let the customer opt out and decline the sale at point of purchase.

Is that too much to ask?

[cbdo2007]

33. That's what I'm saying - the customer is not going to "opt out" of the sale

if it's just $35. They don't want to go back to the store later so they'll just go ahead and accept the charge and complain about how much their bank sucks.

I understand the concept and think its a great idea. I'm just saying that the average consumer is NOT going to opt out when they've got their shopping cart full and their kids are screaming in the cart, or when they've got that new $750 flat screen tv in their cart. They'll just consider it the cost of doing business and go ahead with the transaction.

The banks will NOT go out of business from this, though they may lose 10% of their revenue from it, which if we're parcing pears here is better than nothing.

[SOS]

37. Some may wish to pay $35

But not me.

I want the bank to offer me the choice so I can opt out.
No convenience is worth $35.
That's why I strongly support Rep. Carolyn Maloney's proposal to allow the customer the choice.

Those who wish to pay the fees should, of course, be free to retain this option.

[Skink]

36. I think they did that for awhile.

they have the technology to decline a purchase for insuficient funds. I guess if they can charge you for insufficient funds then get money from say their own credit card transferred over to your checking the fees then just become irresistable.

[The Straight Story]

28. Banks are not very up front with how much is in your account when, not to mention holds

Example: My unemployment money was deposited on Monday and is always available the next day - but Monday was a holiday so was not available until Wednesday. You withdraw money and they hold/deduct it on the fly but they do not so for deposits.

And I worked at the #2 bank for five years managing their data centers. You cannot trust the online account balance and was told so by several folks there at our branches. I have also called US Bank when I had a pending deposit, just wanted to make sure it was there "We can't tell, but it should be there tomorrow if you made one." - and it was made at 7am and this was 12:05 next day (And I thought anything before 3pm was same day - well sometimes it is, sometimes it is not....)

[yodoobo]

27. I can live with that

That is a price that I am willing for them to pay.

[TxRider]

30. Me too, Just cancelled my only two credit cards today!

[noamnety]

32. banks failing vs. individuals failing

I hope someone counters moeb's concerns with that.

[Laelth]

34. Let them fail.

An overdraft fee is just a tax on the poor that subsidizes "free" accounts for the wealthy. This practice needs to end.

:dem:

-Laelth