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We Need To Tilt the Playing Field In Favor of Banks' Customers

The banks can take care of themselves. Their customers (mostly) can't. The basic rules of caveat emptor should not apply, because seller and buyer operate on nowhere near equal footing. Banks have such superior knowledge (as do stockbrokers), that the so-called "fidiciary" standard ought to be imposed on the dealings of banks with their customers.


Banks should be allowed to adjust rates, but only at regular intervals, except those occasioned by market moves, or by customer behavior. Such adjustments ought to be "measured." There should be  no more moves from single digits to 30%.

The circumstances under which penalty fees can be imposed should be strictly limited. Specifically, banks should not be allowed to protect themselves by imposing penalties for "commercially reasonable" actions. Banks shouldn't be allowed, for instance, to imposed penalties for prepayments. Yes, there is the so-called risk of "negative convexity," but banks can hedge these in the financial markets. Customers can't.

Customers given the benefit of the doubt in all transactions. If a customer has several accounts, and one account is overdrawn, penalty fees should be waived if the bank can fix the problem by moving money from one account to another. Only if the customer is overdrawn in total, should the bank be allowed to charge penalty fees. Put another way, a customer should not pay penalties for non-performance of so-called  "ministerial" functions; only for actual insolvencies

If a customer has overdrawn a checking account, penalty fees should be calculated in a way that gives the CUSTOMER, not the bank, the benefit of the doubt; on the fewest, not the largest number of checks that could be overdrawn.

Penalty fees account for something like 10% of credit card revenues. Probably a considerably larger proportion of profits. In doesn't cost much to apply them, meaning that essentially all of the revenue from them goes straight to the bottom line.