POLITICS - Banks As Robber Barons, Again

"Democrats Target Bank Overdraft Charges" by Binyamin Appelbaum & Nancy Trejos, Washington Post

Excerpts

A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.

Banks struggling to survive have become increasingly reliant on the fees, which could total $38.5 billion this year.

But congressional Democrats, who pushed through new restrictions on credit cards this spring, now are promising a crackdown on overdraft fees, using words like "criminal" and "rip-off" to describe the practice of letting people overspend and then charging them fees without warning. Most overdrafts are now incurred on debit card transactions.

Sen. Christopher J. Dodd (D-Conn.) plans to introduce legislation requiring banks to get permission from customers, rather than allowing overdrafts automatically. If customers decline and then try to overspend, the transaction would be rejected. A similar bill is pending in the House.

Dodd dismissed concerns about the impact on ailing banks.

"People out there are getting whacked," he said. "They should have the right to say, 'Deny me the transaction.' "

Because most overdrafts are now prompted by debit card transactions, consumer advocates argue that the industry in effect has created a new kind of unregulated credit card. But the Federal Reserve ruled in 2004 that banks were providing a service rather than a loan, and therefore the customer's decision to spend the money was sufficient to indicate approval. The Fed did require banks to detail the fees on the customer's next statement.

This is typical "buyer beware" attitude of corporations. The corporate world has no responsibility to warn customers.

Historically this is not the case, there was a day when if you did not have enough collateral you did not get a loan. Now days they will offer loans to anyone, even if their existing debt is 10 times their income.

One has to wonder how dense the people who run banks are, that they do not recognize that they got into trouble BECAUSE of their current loan policies.