Thomas Kee

Predatory Banking Practices Undermining the U.S. Consumer

Loaded...

Yeah, I found that during this investigation too...the banks claimed that the reason they changed the order was because they wanted to ensure that the more important transactions were paid first.

However, interestingly, they will pay all of the transactions no matter what order they come in or what size they are, so this claim is moot.

If they drew the line, and refused to pay, then there would be no overdraft charge, but they don't.

Predatory Banking Practices Undermining the U.S. Consumer

I knew I'd open a can of worms with that article, so I accept the good with the bad...

I completely agree, people who overdraw their accounts should be punished for it, and without question. I am not arguing that point. What I am arguing is the discretionary order posting policy of the banks in our country.

Should 1 punishment turn into 4?

Maybe this will be a good analogy for stock traders: What if your broker re-ordered your transactions from highest to lowest at will? Example: you made 6 trades one day, the last trade of the day was the biggest, and it put you over your margin limit. The penalty imposed by your broker is that you do not have access to the cash for 1 day for every over limit transaction; in this case you would have to sit out the next session and wait for your account to become tradable again. Some brokers operate like this as you know.

Now, implement the policies imposed by our banks: If those transactions were re-ordered highest to lowest, that largest (last) transaction would have caused you to exceed your buying power right away, and the number of penalty days would multiply. Instead of sitting out 1 day, you could reasonably sit out 5. This, due to a simple accounting policy and even though it was the last trade you made.

Obviously these are not directly analogous because some brokers treat margin differently, and these posting policies do not apply because brokers want you to trade all the time. But what if these policies did apply? Would you be concerned then?

More often than not, people who manage their money well who never incur these fees don't see what is taking place, and don’t care. However, if your business is based on consumer spending, maybe you should be concerned. The consumer is losing more than $30 Billion every year because of this. Banks are stealing money from millions of consumers every day, money that could otherwise filter down to other businesses.

If ALL banks, and this happens with ALL Banks, are allowed to re-arrange the order of your transaction to increase their internal overdraft charges (four - fold on average), aren't they imposing a rapacious practice on their accountholders?

In my example (article), you had the money in your account to pay the first 4 charges, but the last caused a penalty. Instead of penalizing you for 1 charge, the charge that took you over your limit, they actually penalize you for the 4 charges you had the money to pay for instead.

That's wrong, no matter who you are.

Further, now that the economy is weak, those same people who are struggling to pay mortgages on homes they could not afford (thanks to the creative mortgages they purchased from these same banks) are foreclosing at a higher rate as a direct result of this practice. Not only are they struggling to pay their normal bills and ARM payment, but now the bank is stealing money from them as well.

Argue the point of 'paying the price' for overdraft accounts all you want, and I'll agree with you that for every legal overdraft fee a charge should be imposed. However, when a bank imposes a predatory practice like this one onto accountholders who are struggling in an already weak economy which can, arguably, be directly tied to the mortgage banking policies of recent past, something should be done to curb it.

Banks should not be allowed to increase overdraft fees at will.

A Positive Slant on Financials: Wells Fargo, BofA, Citi

Florida may be a little different. Moreso, so are you...a buyer? :-)