Overdraft fees.....

[Nightshade]

News you can use.

Young Adults Are Getting Hit with Enormous Overdraft Fees
By Leslie Parrish and Ginna Green Posted November 6, 2007.

More and more consumers are finding the deck stacked against them when it comes to battling abusive overdraft fees.

Few Americans are immune to the offers of quick, cheap and easy credit that surround us these days. Indeed, when brand-new adults first arrive on their college campuses, they are often greeted by a bank or credit card company before their resident advisor.

The consumer finance industry-including banks, credit unions and credit card companies-is never short of ways to lure in the American consumer, and a recent analysis performed by my organization, the Center for Responsible Lending, illustrates precisely how banks and credit unions are socking it to young adults -- to the tune of nearly $1 billion a year.

More and more consumers -- particularly young adults -- are finding the deck stacked against them when it comes to battling abusive overdraft fees. Banks and credit unions now routinely allow most debit card transactions to go through when their account holders have a negative balance. Instead of declining the transaction, institutions will advance the funds to cover the shortfall (often less than $20) and charge the account holder an average fee of $34 for each overdraft. Consumers are not given an adequate chance to prevent these fees, which are largely out of proportion to the loans themselves. In fact, adults in general pay about $2 for every dollar the bank advances to cover debit card overdrafts, while young adults pay $3.25 for every dollar loaned to them, due in large part to their frequent use of debit cards for low dollar transactions.

In July, we found that banks and credit unions' abusive overdraft lending practices cost American consumers $17.5 billion in fees for abusive overdraft loans. Our latest analysis, released last month, found that nearly $1 billion of that amount came at the expense of our nation's college students and young adults aged 18-24.

And our nation's young people-dubbed "Generation Plastic" because of their reliance on debit and credit cards-are particularly vulnerable to new banking practices that make it easier for even the most scrupulous account holder to avoid abusive overdraft fees [you mean make it harder for scrupulous account holders to avoidd overdraft fees?]. The rapid growth in overdraft fees levied by banks and credit unions-$17.5 billion in 2006 compared to $10.3 billion in 2004 -has been fueled largely by debit card transactions (popular among Generation Plastic) and bank practices that increase the number of overdrafts (popular at many banks and credit unions).

Some of those unsavory bank practices are related to daily account reconciliation. When banks reconcile a customer's transactions for the day, they often deduct funds in order of the largest payment to the smallest, regardless of the order the transactions were made. The industry acknowledges this is their standard practice. By manipulating the order, the bank still covers the same number of payments, even when the account balance goes into the negative. But they can count more of them as overdrafts-and collect more fees in the process-if they deduct the largest debit first.

Other practices, such as enrolling customers in overdraft "protection" programs automatically without their consent or holding deposits for extended periods but processing checks and debits immediately, can lead to unexpected overdrafts for consumers as well.

There is a solution, however, and it's pending before the U.S. House Financial Services Committee. HR 946, the Consumer Overdraft Protection Fair Practices Act, sponsored by Carolyn Maloney (D-NY) would require banks and credit unions to disclose the interest rates of these abusive overdraft loans so that consumers can compare the cost of this credit option to others. It would also empower account holders by allowing them to the choice to opt-in to an overdraft program, rather than automatically enrolling them without their express consent. It would also prohibit banks from manipulating the order they process checks and debits in order to increase fees.

The legislation is sorely needed for the sake of consumer protection. Even our most vulnerable and inexperienced consumer group-new, young bank customers-is not being shielded from abusive practices. Instead of protecting their financial wellbeing, these overdraft loans are robbing young people of a secure and solid start in their lives.

In the meantime, all consumers, but especially younger ones, should be wary of overdraft protection programs - especially those in which they were automatically enrolled or those that are not linked to a line of credit or to a savings account. Unfortunately, overdraft "protection" programs rarely consider the consumer's best interests and typically protect nothing more than the bank's bottom line.

[McD]

I work in a bank and I've seen the affects of overdraft fees. They suck! They are horrible, but, for the bank I work at now, it's more of a way of training our customers to use their account properly. The best thing that I can advise a person to do is to call your bank if you run into trouble. Keep them informed of what is going on. Chances are they will be more likely to deal with you and cut you a break. With that being said, sometimes overdraft protection isn't bad if it's used as protection--not as a line of credit. I've made mistakes in my checkbook before and not recorded a check and then paid for groceries with a check that pulled me negative. Rather than the bank returning the check, hitting me iwth a fee, and the grocery store hitting me with a fee, the bank paid it and I only had one fee.

It's important to remember that overdraft protection is there as protection--not as a way to keep spending when the money is gone.

[tammy88]

this news report was so accurate!

the banks DO manipulate the charges that come out to get more money from us..when anything happens to mine it always take the largest out then the smaller ones to get more money..

the banks do not process deposit like they use to. anytime something bounces in my account its after i made a deposit..the processing sucks!

i noticed with my bank then when it shows my posted balance and it shows everything pending has already been deducted; that can change by the next morning! if i have money in the bank and items pending that will clear with no problem i can then make a deposit and then next day everything bounced!
it because the order they now process things. my mom has worked for the same bank for 30 years and she says that the banks have changed to get more money from the customers by the way they process and by how much they now charge per transaction. it has jumped 5.00 per over draft fee since last year here.

depending on what branch i go to, to make my deposits makes a difference in when its posted ..i can go into one branch and say i want to cash this check, then make a second transaction and deposit that cash and have it the same day..OR go to another branch do the same thing on a friday and NOT have my $ until Monday at midnight!

i now go to two different banks that are the same company..i cash the paycheck at one bank and drive 5 minutes to another to deposit it and to make sure the cash is credited the same day...

banks suck..i almost want to go back to strictly cash but you need the bank account to pay bills and do other things

[Kitten20]

I would like to see something like that go into effect. I have had to pay over $300 (at one time) to the bank for overdraft fees. Granted, it was a small error on my part, but I still think it is outrageous. I would have much rather had my card declined! And it's true, as the original article and other posters have stated, they do manipulate the transactions so that they can take the maximum amount from you. Luckily I have gotten a lot better since those days (when I was first starting out on my own...) and have been able to avoid any OD fees. Also, when I called my bank to inquire (and remove myself) from their OD "protection" program, I was given some line about how it's not a program that I can opt out of? It didn't sound right to me at the time, but I also didn't question it any further -- I have just learned to be WAY more careful.

[Persimmon Lace]

And people fall for the credit/debit card is faster than check or cash and more convenient and safer.....whatever. We are being deluded into handing our cash over and going to a cashless society faster and faster. The banks count on people being uninformed and careless so that they can fill their pockets with overdraft fees. Debit cards used as credit cards insure against loss for the banks and are not that safe for consumers. Until consumers take charge of their cash or go back to strictly checks this will continue. We need to vote with our money. The newest generation of banking consumers is being sold a bill of goods and they are allowing it to happen. Give me hard cash any time or a check any day. I hate debit cards.

My father retired from banking before it became so fee oriented, he was very forward looking and was appalled at the way fees were becoming so much apart of banking. He couldn't wait to retire.