Overdraft fee overload: Can we get a little help here?
Filed under: Banks, Ripoffs and Scams
Banks will charge a shameful $38.5 billion in overdraft fees to the American public this year, and most of them are the ones who can least afford it -- the working poor and the unemployed who are constantly juggling utility bills and can barely afford groceries.Congressional Democrats are finally moving toward limits on banks' ability to charge overdraft fees, calling them "criminal" and a "rip-off." Given my long and once-cozy relationship with the banking industry, I agree -- and think it should have happened years ago.
We had a particularly good year in 1997, in what is now Wachovia's investment banking division. My former favorite boss had taken the position of head of investor relations, and he came in the wake of annual financial reporting to proclaim the truth: the real money was in fees.
We'd made millions structuring syndicated loans and securitizing assets, yes, but the bank's millions of retail customers had funded far more profit with their overdraft and ATM fees. It was double what we'd made in all of investment banking, even in this record year.
I was uncomfortable at the time -- heck, I was a retail customer and paid my share of ATM fees even though I worked in a building with a First Union cash machine right there next to the elevator banks, and a branch a few yards to the south.
But I understood that the reason I had my cushy job was because many of its consumers were living check-to-check, and that is an exaggeration which gives one the illusion that one check is enough to last workers and the unemployed until the next check arrives.
That was before I had a family and knew how it was to write checks and click little cheerful online "PAY" buttons on the day a monthly check arrives and realize you now have only $76 to last you a few weeks, and must decide whether you can buy your child new shoes or organic raisins and ohmygod $#@% honey did you really pay PTA dues? We totally can't afford that! I just splurged on a $4 coffee drink because it's payday and it's going to cost us $33 after the overdraft fees come in.
This is no longer 1997. It's 2009, and overdraft fee growth has gone on, untrammeled and now mostly due to debit card transactions -- my $4 coffee splurge and my brother-in-law's $5 pack of cigarettes and my oldest son's $6.49 Bakugan battle brawler (we promised!) and my youngest son's $6.99 box of diaper wipes -- that end up costing consumers as much as hundreds of dollars a month when they can least afford it.
Big banks like Bank of America order transactions largest-to-smallest, ostensibly to ensure consumer's rent gets paid, but we all know really to increase the likelihood and quantity of overdraft fees. (An old boyfriend working as an associate in Bank of America's legal department wrote an opinion in 1994 that this should be stopped as it would eventually cause large losses in class-action lawsuits; this hasn't happened, though consumers and their lawyers surely have tried.)
Instead of slowing in the economic crisis, banks have opened up new frontiers of overdraft revenue, allowing debit transactions even though consumers' bank balances aren't enough to cover them, essentially providing a vastly expensive payday loan. If that weren't enough, many banks hold checks that are about to be deposited, causing overdraft fees for consumers whose bills are paid automatically through the zillions of "convenient" services and who make the mistake of counting on money due to them. Overdraft fees have risen over the years, from an average of $10 when I was a budding investment banker to $35 today -- even though that $35 fee is frequently charged on a "loan" of $3 that the consumer really didn't want at that expense.
The proposed bills generally just concern the consumer's ability to opt out of the debit card loan program; in other words, give bank customers the chance to say "no" to transactions if funds aren't available. Some ideas go farther; I like the concept of fees that are proportional to the transaction. The fact that a fee on a $3 prescription or a $5 sandwich is a flat $35 is outrageous.
I wish Democrats would go farther, though, and make fees more in line with what the banks' actual costs are. I'm sure the interest the bank pays -- and the computer transaction that catches the fee -- are closer to a few cents than $35. I'd be willing to pay double the actual cost for that service.
But that might be entirely too fair and we have the banks' health to contend with! Working poor and unemployed, be damned.
Reader Comments (Page 1 of 1)
9-21-2009 @ 6:30PM
edward rudow said...
I was just charged $170 in OD fees because the bank processed an item of eight hundre dollars in front of four items which had been transacted the day before totaling less than $300 .had they processed in transaction order I would have incurred one fee of $35 instead of five for $ 170. I belive the banks practice of doing this is a violation of the RICO laws and their advisor should be made correct . We need to launch some major class action suits.
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9-22-2009 @ 5:58PM
oscar said...
This is very typical of "Bank of America" Stay Away from Bank of America. They are charging their customers bank fees more now then ever before. Pass the word around. Say NO to Bank of America. Go to another bank
9-21-2009 @ 7:45PM
Mom said...
Go to the drugstore and buy money orders...they are a lot cheaper than overdrafts and stop using the banks....try a credit union in your neighborhood....go on the envelope system of putting your money away...for each bill and stop paying by using a credit or a debit card. The postal service has money orders.
stop using online bill pay unless you have too!!
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9-21-2009 @ 9:54PM
jeff said...
great article....my bank at the time(Wells Fargo) pulled that "post the largest first" b.s. on me a few years ago....i knew that 2 small(~$5) purchases had hit on a Saturday and saw that a much larger CC purchase was going to hit on a Sunday or Monday and overdraw me, which i had no problems with since it was my fault...then when they hit(Wells Fargo posts weekend transactions on Tuesday - probably to increase the overdraft $$$$), on Tuesday they had mysteriously reversed the order and when i called in to the customer service they acted like they didnt know what the hell i was talking about....just filthy liars...
another thing they liked to do was they offered these "Direct Deposit Advances" where you borrow up to $500 for a month at $10 per $100 loaned, which is fine because you know that when you sign up for it....but what they either dont tell you or bury in the fine print is that they will grab ANY ANY ANY EFT deposit of $100 or more to your account to pay themselves back as soon as possible - so if you take the DDA on Monday and then three days later you drag $110 from your PayPal account to your checking acct, they steal it pay themselves back immediately and instead of paying maybe 120% interest rate you pay 1200% and youve only borrowed the money for 3 days.....they could EASILY fix this in their software so that they wait at least 25 days to grab your NEXT direct deposit but i guess they dont have to, so why bother.....what happens is people get a Christmas bonus or the govt stimulus check and Wells Fargo effectively seizes that money and takes a 10% cut of it.....sleazy sleazy sleazy....
i
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9-21-2009 @ 10:45PM
Codys Mom said...
Last month I was charged a $34.00 overdraft fee for a 5 cent transaction by Chase/WAMU. I closed my account. I started buying money orders at the post office to pay my bills. Conveniently, the first credit card payment I sent (by postal money order) magically showed up the day after the bill was due. They charged me a $30.00 late fee and a $35.00 over limit fee (the late fee made me go over my limit). I mailed the payment 14 days in advance of the due date, certified mail. They are 2 states away from me. I know it didn't take 15 days to arrive. I haven't received the signed return receipt yet. What to do, what to do? Very aggravating!
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9-22-2009 @ 2:19PM
Matt said...
Call the card comany. If it was your first late fee, or first in a while they normally take it off.
9-22-2009 @ 2:31PM
Matt said...
Paypal caused me to get 6 overdarft charges. 4 were put through at the same time with no money in the account. Paypal does not want to pay credit card companies so they try your bank first. Now banks will put transaction through no matter your balance. I had a negative $136 balance and they put two more transactions through, even though that day I blocked the account( the only choice they game me). Have to go to the bank to add or subtract money. They said it was because they were already set to go through.
Banks are more incline to make their customers with the most money happy, because they make money off them. Though you could argue the ones with less money makes them a lot more, but they can't refund that money and still say that. Though I have been with Citibank since 1991, I plan to leave them if they don't refund the last $51 of the $204 they charged me. I'm going to deposit a big settlement check, and tell them either the negative $51 is gone by the time it clears, or I'm gone.
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9-22-2009 @ 9:16PM
michelle said...
stay away from BANK OF AMERICA these criminals should be imprisoned for this decepitive practice, they charge a $10.00 over draft when they had me open a savings accont to protect my checking.
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9-23-2009 @ 3:00AM
Fed up said...
How in the WORLD is Bank of America (and other banks) getting away with this?? This is absolutely fraudulent and criminal! If I even thought of doing anyone this way, I would be in prison! I cannot believe for the life of me why our lawmakers are allowing this unless they are benefitting from it also. I have been taken for alot of money from B of A., with their unscrupulous "order of processing" and other scandalous fees they have come up with. And furthermore, I've done research....the majority of the shareholders are from Saudi Arabia and other countries. When are we, as Americans, going to stand up and put a stop to all of this??? When are we going to take our country back??
9-22-2009 @ 10:44PM
Carol Lantow said...
So--let's get some legislative action on these unscrupulous banks. Wells Fargo really did a number on my son. He deposited $80 into his account at an ATM on a Saturday morning. He then made several small purchases at a mall (coffee, magazine, etc.) with his debit card. Well, it seems the deposit did not credit until after the weekend, and Wells Fargo charged him in excess of $400 in overdrafts for those minimal purchases (at $34 per purchase) as well as "chewing up" his deposit! What kind of a country do we live in where corporations can be this crass with their customers. Needless to say, he no longer banks with Wells Fargo! This nonsense needs to stop ASAP, or we need to start picketing those banks!
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9-23-2009 @ 12:00AM
lyle wooley said...
I can tell you horror storeies about the banking industry and their fees, PEOPLE ITS TIME TO FIGHT BANK THEY GET BAIL OUT MONEY AND WE ARE SUFFERING
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9-23-2009 @ 3:17AM
Lynn said...
BofA is guilty of FRAUD and ILLEGAL BANK USURY. It is long past time for Congress to return integrity to our banking system by eliminating the private (not government) Federal Reserve and prosecuting such illegal and abusive banking practices as these:
1) BofA's ATM account summary receipts are purposely inaccurate AND reflect different information from what the teller will tell you and what the online checking reflects. EVIDENCE: Beware of the $3 fee at the ATM that you are told will get you an up-to-date account outline allegedly of all transactions since your last statement. Not so. I just showed a WRONG Summary to the Bank Manager that I had been charged $3 for: A $300 cash deposit made 6 hours earlier was missing from the Summary (though the balance reflected part of it) and a check that had gone through the bank 4 or 5 days earlier (according to the teller's print out) was also missing from my ATM Summary. (BofA policy:That teller-print-out is not to be given to the client and only shown the client at your own branch). In addition, there is conveniently NO RUNNING BALANCE on that ATM summary nor on the bank teller version (even though there is in the online version). It takes nothing for all these accounting systems to use the same information including timely, consistent posting and a runnining balance, if they truly intended to serve the client. BofA is one of top of not the top bank in the country. Yet, currently, all these records and the electronic balance atriveable by phone may all be different given the time of day. That takes a purposeful manipulation of the data. Truth is, they don't want you to have certainty nor a running balance so they can hold (for their profit making convenience) and bulk transactions (even though money is already withdrawn from your account) as if the "paperwork from the transaction" had not come in so they can not post it (yet, you have no use of the money as its been taken out of your account). They then rearrange the order the transactions occur so they can withdraw the largest sums first and bounce all the rest, asserting they all came through before the deposit was posted even though the individual transactions clearly show that is not the case. With an accurate running balance and consistent cross-platform records based on the time the transactions actually occur, this fraudulent manipulation of data which results in multi-millions of dollars in overdraft fees would not be happening and clients could more easily hold the bank accountable.
2) If you run a close balance, don't be seduced into BofA's "Keep the Change" - they round up your check amount and transfer the difference to your checking account. Sounds great particularly when they say they will match that amount penny for penny for the first 3 months. If that rounding up overdraws your account, your money transferred from your checking to your savings overdraft protection won't kick in without them charging you $10 for the privilege and without a balance of at least $50 in your savins; otherwise you will be charged the overdraft fee(s) even if you have enough money in your savings to cover the slight overdraft. Congress needs to investigate how many accounts were overdrawn thanks to "Keep the Change" at a rate of $35 per overdraft with no ceiling on how many fees can be charged in a day. (ie: when they withdraw $35, several small transactions will bounce even if you didn't overspend your money but they do it for you in the name of helping you save. I was charged $175 in one day and since I thought my account was balanced when they had actually transferred over $6 over a few days and held transactions until they could bounce them together, five days went by without me knowing there was a problem, so they charged me an additional $35 for being overdrawn 5 days or more. That's $205 in fees when I hadn't overdrawn my account but they had "helped me save".) It costs the bank nothing to automatically transfer from your savings to your checking to cover an otherwise overdraft, anymore than it costs them nothing to "Keep the Change" auto transfer from your checking to your savings. In addition, that the process of transferring from my savings to my checking when there is ample balance should still cost me $10-$15 per transaction for overdraft protection is no overdraft protection (they say they are saving me $20 in fees) but further USURY.
CITIZENS UNITE. Make your Congress stop these massive abuses or we should all take our money out of these large banks and move them to local customer friendly banks while there still are some left.
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9-23-2009 @ 9:39AM
B. David Mehmet said...
H.R. 1456 "Consumer Overdraft Protection Fair Practices Act"
Http://www.Badisse.com
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9-23-2009 @ 11:55AM
MrIveysGirl said...
I too have been hit by the excessive banking fees and have heard more horror stories from friends who bank with a few regional banks in the DC area. I will certainly start a campaign to my congressman regarding this and urge my friends and family to do the same. I worked in the banking industry from 1977 - 1996 and I am amazed by the amount their fee income has increased in the past 13 years alone. Had a chance to see the Good Morning America show interview with Michael Moore this morning on his new movie. Capitalism: A Love Story, I can't wait to see it. He's got the right idea, "We the people" have a right to demand our money back from the financial industry. We just need an act of congress to do so.
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10-17-2009 @ 7:36PM
olubunmi fabiyi said...
With $83.65 in my account, at the start of business sometimes this week. Bank of America charge me the sum of $210 on seven items $55.00, $6.89, $6.00, 30.00, $9.51, $20.00 and $2.00. This they did, after holding on to the sum of $61.51 on 4 items out of the seven mentioned above representing $30.00, $9.51, $20.00 and $2.00 repectively leaving me with a balance of $22.14 and for which they use my outstanding balance of $83.65 to pay. They also failed to follow their highest to the lowest debit policy in this case. The other remaining 3 items were in the amount of $55.00, $6.89, and $6.00. I was very frustrated when I noticed this development even after calling their customer services center, spoke with one of their manager. The only answer they could offer was did I not want them to charge my account? To add more insult to my injury, the bank only posted in my daily bank summary, 3 items for the sum of $55.00, $6.00, and $6.89 were posted as paid at the close of business which left me with a balance of $15.76 but still went ahead to charge their imaginary fees. Bank of America not only fraudulently charge me overdraft fees for paying with my money ($83.65) in my account but its officers were bold to say they are not going to refund the money even after I called them.
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11-01-2009 @ 1:41AM
Outrageous said...
I agree my husband's checks are always direct deposits. Last week my bank overdrafted us big time. His check was for $998.72 and it always post on MOndays but it's always been available to us on saturdays so i went ahead and did what i always did and paid some bills, got groceries, etc and then on tuesday i go online to look at my account and it says i'm negitive -$361.95 so i call them up arguing with them and they tell me it's because i spent the money before the day it posted so i explained that i done this all the time and always went by my available balance no matter what and even told them i had the bb&t alert that i used telling me what my balance was that saturday and that i broke nothing in using the funds that i've always done it for the pass year and never got overdrafted for it the woman rudely told me that I just got unlucky this time and even though my available balance said it was there i knew my husband direct deposit didn't post until that monday so i should of waited to spend it...didn't see what the problem was i'd been doing this for a year ..the woman rudely told me have a good day and hung up on me. the next morning i wake up and look at my account online and see that i'm now negitive -$518.37 then the next morning it goes up to neg-$588.37. I'm gettin really angry now and frustrated so i'm calling this bank from all around...they all tell me the same thing so i call my nearest branch they understand what i'm saying but can't get me a refund without higher authority so the next day on oct. 30th i'm told that they'll only refund me $156.00 and that's it so I get off the phone and then on saturday i get up and check my account again to see if my husband direct deposit was available to me this saturday like it has been for the last year and it was but my husband direct deposit for this week was $1,135.00 and only like $245.00 was available to me so not understanding why i looked at my account and realized my account done went from -588.00 to neg-$908.00 i am completely cussin now and not understanding what is going on at all. My husband just made nearly $2,133.00 busting his ass for christmas and the only thing i have is $245.00 in 2 weeks to show for it because every bit of our money went on 17 overdraft fees totaling $595.00 @35.00 ea. This is nonsense i mean gosh i always done this and now i just got unlucky and got caught.. I got 5 kids that we have to support and to me that's like taking money from them. These banks ought to give people options before charging overdraft fees like this especially when it shouldn't of even been there in the first place. An overdraft fee should be lowered to at least $5 or $10 but $35 that's alot of money for people to pay and they wonder why families are losing their homes, straving, and etc....sheesh look to the banks...the taketh away half of peoples income a year by charging outrageous fees....i agree something needs to be done. we deserve the right to demand our money back...Banks are suppose to keep your money safe and protected....looks like we need protected from them...they are the thieves!!!!!!!!!!!!!!!!!
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