PROGRAM SUCCESS – AUGUST 2009
PAGE 33
Are Overdraft Fees Another Form
Of Predatory Lending?
By Darlene Robinson,
President/The Steeple HOME Team
A FDIC report from December 2008 showed that 81%
of banks allowed overdrafts to take place at the ATM
and point-of-sale purchases using debit cards. Less than
10% of these banks actually informed consumers
before the transaction completed that there were
insufficient funds. The banks surveyed earned almost
$2 Billion in overdraft related fees in 2006. This means
that over 70% of the $2.7 Billion in total service
charges and fees came from overdrafts. The Center for
Responsible Lending reports that banks and credit
unions collect around “$17.5 Billion each year” in total
overdraft fees.
The majority of people may think that the banks will
not let them use their debit card, if there is not enough
money to make a purchase or ATM cash withdrawal.
Isn’t a debit card supposed to be the same as cash? A
logical person may think that if there is not enough
money in the account, the bank will not let the purchase
or ATM withdrawal transaction be completed. So if you
think your bank or credit union is doing you a favor by
letting you make a purchase at a store, or withdraw cash
from an ATM (when you thought you may not have
enough cash in your account to cover it)….think again
In other words the bank is giving you an involuntary
loan advance to cover your purchase, and they want this
money paid back with extremely high interest
(fees/charges), which could triple the amount you
actually owed. A dollar cup of coffee could cost you
anywhere from $36 dollars or even hundreds if this
involuntary loan triggers the dreaded domino effect of
bouncing check after check.
Let me share my overdraft nightmare. I made a deposit
around 10am on a Monday to make sure that I had more
than enough money in my account to cover a check that
I had written late Friday evening. Before I left the bank,
I looked at the time on my receipt and confirmed what
I thought was my actual account balance. I was sure
everything would clear. Two days later, when I made
another deposit, and looked at my receipt, I saw that I
owed the bank $400! How could this happen?
After doing some research I found out that banks are
more likely to process transactions from largest to
smallest dollar amount, because this can trigger the
overdraft process on your account. Banks can also
legally give you a false report as to how much money
you actually have in your account.
To make a long story short I was able to fight my case
and got most of the fees taken off. How many people
don’t go back and fight these actions? These fees will
go onto your credit report and make it almost
impossible for you to open a standard account at any
other financial institution. You will only get offered a
“second chance” account, where you will have to pay a
monthly fee, usually around $10 per month just to have
an account.
The Federal Reserve recently proposed a change of
overdraft rules which could be approved very soon.
(www.federalreserve.gov) for more info on banking
changes that may affect you and your family.