Bank Robbery – Then and Now

With the summer Movie blackbuster season well under way, possibly the top movie of the summer will be released this week detailing some of the life of John Dillinger, played by possibly the best actor of his age group, Johnny Depp.

In the 1930 Depression era, bank robbers and gangters became pop culture heroes  – John Dillinger, “Baby Face” Nelson, “Pretty Boy” Floyd, “Machine Gun” Kelly, Bonnie & Clyde, and probably the most deadly gang – that of “Ma” Barker’s boys and Alvin Karpis.

John Dillinger

John Dillinger

Whereas once it was criminals robbing banks – it’s now the banks robbing the public. And like the criminals of the 1930’s – it’s time for the Feds to step in -

Overdraft Fees: A $17.5 Billion Dollar Industry

Consumers being weighted down by overdraft fees may soon have relief in the form of H.R. 1456, The Consumer Overdraft Protection Fair Practices Act.

Introduced by Rep. Carolyn Maloney (D-NY), the bill would provide consumers with protection against unfair banking practices that are designed to maximize the number of overdraft charges and gouge consumers.

Overdrafting has turned into a multi-billion dollar enterprise for the baking sector, oftentimes by means that are unethical at best.  According to The Center for Responsible Lending, overdraft charges generated $17.5 billion for banks in 2007, up 70 percent in 2004 when banks generated $10.3 billion.

Banks have achieved this amazing growth in overdraft charges by automatically enrolling consumers without their knowledge, juggling transactions to increase the frequency of overdrafts and not providing any warning to customers that an account is near being overdrafted.  According to the Federal Deposit Insurance Corporation, 75 percent of banking customers are automatically enrolled in overdraft protection programs.

“When overdraft fees are $30 or more, a $5 treat at Starbucks becomes a $35 shock after the overdraft fee is applied. And when multiple purchases in a day are posted in a sequence that only benefits the bank—incurring multiple fees—then something is broken in the system and must be fixed,” Maloney said in a press release.

When that occurs, what the banks do amounts to a loan – with an astronomical interest rate.  Typically, a $100 overdraft that takes two weeks to pay back would result in a 900 percent APR.

The Maloney bill would seek to curtail the banks’ ability to unknowingly charge consumers such high fees.

First, the bill would require customer consent before banks can provide overdraft protection and would put overdraft loans under the oversight of the Truth in Lending Act.  Second, the bill would prevent banks from juggling the order of transactions to increase the frequency of overdrafts and therefore maximize the amount of fees gained.  Finally, the bill would require banks to inform customers that a transaction could trigger an overdraft and would provide customers with an opportunity to cancel the transaction.

“Consumers simply shouldn’t be enrolled in overdraft programs without their consent,” Maloney said.  “Since Congress just required an affirmative opt-in to over-the-limit fees in my credit card reform law, regulations should similarly require an opt-in to overdraft fees.  Whenever banks step over the line of reasonable business practices into abuse of consumers’ trust and understanding, government needs to act.”

You know it’s bad when the banks have become the criminals.

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5 Responses

  1. I was fined $100+ dollars a few months ago on one of my busines accounts. (I know I should have only one account, not two… I simply never closed one of them due to unresolved ties with my merchant account.)

    Each of the tranactions were under $20.00 each… I take responsibility of the mishap, but I was able to reverse most of those fees after explaining the situation with the branch manager… The fact that I’ve been with the bank for over 10 years helped I’m sure. I don’t ever rememeber it being this bad before.

    I’m looking forward to H.R. 1456.

  2. Have accounts for different purposes. One is for my Mom who is totally disabled in a Nursing Home. Her old account was with bank of America – so we kept it. Set up several of her bills to auto-pay. A couple of months later, suddenly her checks started clearing exactly one day after the auto pay – or supposedly AFTER the autopay was processed – ripping her off for hundreds of dollars in fees.

    I’ll be glad for HR 1456 as well.

  3. THE TRUTH ABOUT BANK OVERDRAFT FEES (The Scam)

    I am going to make this short and simple. The bank scam to increase overdraft fees works like this:

    Scam Ingredience:

    (1) Delay posting account balances

    (2) Delay posting charges

    (3) Re-sequence and pay charges from high to low

    THE OVERDRAFT SCAM:

    Bank Balance = $100

    If you went into overdraft on a single charge and the bank paid the charges in order by DATE (Day#1 then Day#2 charges) even if it re-sequenced them from high to low, you would only pay one single overdraft fee of $35. But by delaying the postings they can batch them together on a single day and then re-sequence them to increase the $35 overdraft fee to $105.

    OVERDRAFT FEE $35:

    Charges Day#1: $10 + $10 + $5 = $25 (account balance = $75)
    Charges Day#2: $65 + $35 = -25 (You only pay one overdraft fee on the $35 overdraft)

    OVERDRAFT FEE (by delayed charge postings) $105:

    Batched Charges Day#2: $65 + $35 + $10 $10 + $5 = $125 charges (3 overdraft fees = $105)

    The delay in posting an account balance is to throw the consumer off in believing they have enough money in their account so they can go into overdarft. Novice consumers don’t understand that the problem is in how the bank is creating the multiple overdrafts from a single overdraft. So, when the bank tells the consumer “it’s your fault for not watching your balance”, the consumer thinks they are at fault because they are at fault for the initial overdraft; but the consumer doesn’t understand how the bank creates the additional overdrafts. Thus, the scam.

    Read More at http://www.Badisse.com

  4. Good Post, David!

  5. I don’t think the reform being considered by Congress goes far enough because I don’t think they (and we) know the extent to which bankers will go to get their way. On suspicious practices at amcore bank in IL, I recommend the following:

    http://euandus3.wordpress.com/2009/11/05/advantage-banks/

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