Friday, February 19, 2010

The answer to my prayers!

I just found out yesterday that there are new Federal Reserve rules going into effect this summer that will restrict banks from charging overdraft fees on debit cards. Hallelujah.

From the New York Times, last November:

The rules, which take effect next summer, are the latest issued by the Fed after criticism that it did not move quickly and aggressively enough to root out deceptive and abusive consumer lending practices.

The law does not apply to checks you wrote on your bank account, though, only debit cards.

Here's something I didn't know, until yesterday: when the bank receives all the charges you made on your debit card, they rank them by amount, not by the date you rang up the charge. So they take the largest amount out first and thus it always appears as if the overdraft fees hit the smaller amounts at the bottom of the list (because they do).

Why is this deceptive? Because if it was that one big transaction that put you in overdraft, you should only have to pay a fee for that one transaction. But under the current system, you get hit with fees for any and all those other smaller charges that were actually made before you went into overdraft.

Many people would prefer to get hit with a fee than to say, reveal to a mortgage lender that they didn't have sufficient funds to cover their mortgage payment. That's an individual choice. But to render your check register null and void by "reconciling" debits in order of amount and not date is just wrong. And that's why it has been fixed.

(Thank you to the "store manager" at TDBank for taking the time to explain this all to me - something Bank of America never did. I now have an account there - I'm making the rounds. All the banks do it that way, he told me.)

But soon, if you don't have the money, the charge will be denied unless you expressly sign up for overdraft "protection."

Something that nobody ever says, though - these "deceptive and abusive consumer lending practices" really only affected people who live on the margin. If you have enough money to live comfortably, you're never on the brink of an overdraft.

Thank god I don't have a family and don't have to choose all the time between going into overdraft and feeding my children.

You think being poor is easy?

Banks, governments - what do you think the Lottery is but a mechanism for making money off low-income people? - you name it, the people living on the edge are the targets. And then the government turns around and creates all these social programs to "help" low-income people ... you know, the ones that banks used to pad their coffers by $25 billion to $38 billion a year and the ones buying lottery tickets and those paying outrageous taxes on cigarettes.

Preying on the poor is big business. I'm pleased that the government has taken a step in the right direction.

1 comment:

SJS said...

It's not just those of low income who disproportionately pay cigarette taxes. It's those who suffer from mental illness. That the gov't sustains itself on the backs of the poor and the mentally ill is unconscionable.