The most profitable source of income for banks? Overdraft fees • Hacker News Board

Re: The most profitable source of income for banks? Overdraft fees

#61

Post by mrmirz » Tue, Aug 25, 2015, 1:26 AM UTC

onion2k wrote: post #11

I'm not saying this isn't true, but the post is on the blog of a short term loans company who have a vested interest in people believing a short term loan would be preferable to an overdraft fee, and there's no cited report or study that suggests banks make most of their money from fees. A couple of articles that make me wonder; http://www.businessinsider.com/chart-of-the-day-how-a-bank-m... http://www.wsj.com/articl…

"In fact, roughly half of respondents to the ICBA survey say that overdraft fees constitute their most profitable non-depository and non-lending product, despite regulatory changes that have crimped their income potential."

http://independentbanker.org/2014/01/finding-more-fee-income...

Re: The most profitable source of income for banks? Overdraft fees

#62

Post by bedhead » Tue, Aug 25, 2015, 1:26 AM UTC

stevewepay wrote: post #9

This is a quote from Michael Lewis' The Big Short, I'll never forget it: Obsessing over Household [Finance Corporation], he attended a lunch organized by a big Wall Street firm. The guest speaker was Herb Sandler, the CEO of a giant savings and loan called Golden West Financial Corporation. “Someone asked him if he believed in the free checking model,” recalls Eisman. “And he said, ‘Turn off your tape recorders.’ Eve…

No, it's the same system that allows the lottery to exist. It's not "fuck the poor", it's "fuck the stupid" (alternatively, "fuck the bad-at-math"). If there's a high correlation, I don't think anyone is going to be terribly surprised, as uncomfortable as that may be.

I have been poor. I have also been the opposite. I have also been a bank employee, and a professional investor who studied security analysis by looking at banks. The feds have rightly come down on banks via recent regs about how to charge overdraft fees, because banks did in fact used to play bullshit games with how they charged fees. A lot of that has been fixed. But the uncomfortable truth is that the people who repeatedly fall victim to these fees these days are simply irresponsible. You might as well complain about the high price of parking/speeding tickets - every opportunity in the world is there to avoid it.

I'm sure this will get about 50 downvotes but whatever.

Re: The most profitable source of income for banks? Overdraft fees

#63

Post by Karunamon » Tue, Aug 25, 2015, 1:27 AM UTC

fredkbloggs wrote: post #23

We could read 100 sob stories, or we could recognize that every single overdraft (other than errors and fraud, which do happen but are rare and these days invariably corrected) is voluntary . Yes, banks will make money any way that they can. Yes, they will happily take your last dollar, or even dollars you don't have and never will. No, they do not give one flying fucking rat's ass about you, your sister, or the home…

And the best part is, you're being downvoted for this..

I dunno, apparently a lot of HN thinks that it's impossible to believe that banks are generally run by bastards while simultaneously believing that 99% of these instances are completely voluntary and completely avoidable?

If you keep track of what you're spending your money on, it's not a problem you're gonna have to ever deal with - and I say this as someone that's played this game with Wells Fargo in the past.

But apparently, advocating for people to be responsible for their own actions is a radical and terrible thing nowadays.

Re: The most profitable source of income for banks? Overdraft fees

#64

Post by oasisbob » Tue, Aug 25, 2015, 1:28 AM UTC

some-guy wrote: post #12

About five years ago I worked at Wells Fargo as a teller while in college. During that time Congress passed a law prohibiting debit transactions from going through if there weren't enough funds in the account. Shortly after that we were told to start telling our customers about a new service called Debit Card Overdraft Service which was marketed as a "convenience" for customers when they were in a bind. When I asked…

I was working at a credit union during the same time, and I found the immediate change in rhetoric really disheartening.

Overnight the line for overdrafting your account went from, "You're being financially irresponsible by not properly balancing your account - you deserve the fee" to "Overdraft Protection is like an umbrella - nobody expects it to rain, but if it does it's nice to have protection.

I was shocked at how much fighting there in the industry to carve out transaction types from the opt-in behavior.

Re: The most profitable source of income for banks? Overdraft fees

#65

Post by colanderman » Tue, Aug 25, 2015, 1:28 AM UTC

staunch wrote: post #6

The pain overdraft fees cause poor people is truly hard to comprehend unless you've been there. It's incredibly evil. You've got $16 left for food and then then the Flickr account you forgot to cancel gets charged to your account, putting your balance at -$9. Now you have to pay $35/day until you get enough money to cover the overdraft fees. You end up paying $100+ for a $9 forced loan. The bank could have just decli…

Oh it's better. I've seen a poster on a commercial bank in the US which advertised a usurious loan (I forget the exact rate but it was up there with pay-day loans) that was only in Spanish while all its other products were advertised in English.

Re: The most profitable source of income for banks? Overdraft fees

#66

Post by mikekchar » Tue, Aug 25, 2015, 1:28 AM UTC

noonespecial wrote: post #3

stephengillie wrote: post #2

This is one of the financial barriers that severely impacts the ability of poor people to amass monetary wealth, but is invisible to the rich. Before they were overdraft fees, they were Non-Sufficient Funds fees for overdrafting, and these NSF fees still exist for those who can't even get the "overdraft loan". > Banks originally offered clients this service as a courtesy. Banks originally opted in at-risk customers.…

The most egregious example that has happened to me: I had a checking account with a hidden $5 fee if the balance went below $5000 in a given month. I made a big purchase, left the account with about $3 in it and scheduled a transfer from savings for the next day... you know how it played out: $5 fee on the low balance, $50 charge to "borrow" the $2 all taken from the transfer the next day. They call that a "service".…

I once had a bank account with $100 in it. I went travelling and didn't access the account for a long time. Eventually, I returned back and found that they had sent me a letter saying that they had close my account for inactivity. The fee for closing the account was $120, which put the account at -$20. They were further charging me a $75 overdraft fee and informed me that my account was in arrears for $95 dollars. I did not pay them, but neither did I get my $100 back.

Re: The most profitable source of income for banks? Overdraft fees

#67

Post by pyre » Tue, Aug 25, 2015, 1:29 AM UTC

Touche wrote: post #20

staunch wrote: post #6

The pain overdraft fees cause poor people is truly hard to comprehend unless you've been there. It's incredibly evil. You've got $16 left for food and then then the Flickr account you forgot to cancel gets charged to your account, putting your balance at -$9. Now you have to pay $35/day until you get enough money to cover the overdraft fees. You end up paying $100+ for a $9 forced loan. The bank could have just decli…

> They know exactly what they're doing. They're rich bankers robbing poor people. I can understand thinking that the "correct" thing to do here is to simply not allow a transaction when there aren't sufficient funds, but this language goes overboard. It's not robbing a person because they were unable to keep track of how much money they own and adjust accordingly.

Large banks will do things like structure charges so as to extract the maximum amount of overdraft charges. For example:

  You have $40 in your account. You spend $20, then $12,
  then $5, then $120. One would logically conclude that at the
  end of the day, the bank will resolve these *in order* and
  you will have a single overdraft fee. Large banks *cough*
  Bank of America *cough* will explicitly structure those charges
  to resolve like this: $120, $20, $12, $5. Now you have 3
  overdraft fees ($35 a pop when I was with BoA) instead of a
  single overdraft fee.

Do you not see anything morally and ethically wrong with this?

Re: The most profitable source of income for banks? Overdraft fees

#68

Post by gizmo686 » Tue, Aug 25, 2015, 1:29 AM UTC

mikekchar wrote: post #41

staunch wrote: post #6

The pain overdraft fees cause poor people is truly hard to comprehend unless you've been there. It's incredibly evil. You've got $16 left for food and then then the Flickr account you forgot to cancel gets charged to your account, putting your balance at -$9. Now you have to pay $35/day until you get enough money to cover the overdraft fees. You end up paying $100+ for a $9 forced loan. The bank could have just decli…

There are a couple of times in my life when I was quite poor (for someone living in a G8 country...) The biggest thing I learned was to use cash. Cash is awesome because you can see how much you have and you can't spend more than you have. Even now that I am relatively well off, I have my habitual routine of getting cash at the beginning of the week and spending only that for the week. In fact, I make sure that there…

Being legal tender means that something must be accepted as payment for a debt; it does not mean that it must be accepted as payment when no debt exists. For example, if you go to a restaurant that serves you before giving you your check then they are required to accept cash. However, they are allowed (possibly depending on jurisdiction) to insist on being payed by card prior to serving you.

Re: The most profitable source of income for banks? Overdraft fees

#69

Post by outworlder » Tue, Aug 25, 2015, 1:29 AM UTC

fredkbloggs wrote: post #44

noonespecial wrote: post #3

Earlier quoted context omitted.

The most egregious example that has happened to me: I had a checking account with a hidden $5 fee if the balance went below $5000 in a given month. I made a big purchase, left the account with about $3 in it and scheduled a transfer from savings for the next day... you know how it played out: $5 fee on the low balance, $50 charge to "borrow" the $2 all taken from the transfer the next day. They call that a "service".…

Couldn't wait until the next day to make the purchase? Couldn't use cash or a credit card instead? You're an adult. You're obviously literate or you couldn't be posting here. Unless these fees were not disclosed to you (a MAJOR breach of the law if true), you had every opportunity to know that this would occur and to prevent it. Try taking responsibility for your own actions.

And, as part of his adult responsibilities, he's obviously responsible for watching his bank account balance like a hawk. It's not like adults have to do anything else.

Also, you're assuming the "purchase" was something superfluous that could wait.

Re: The most profitable source of income for banks? Overdraft fees

#70

Post by mbrameld » Tue, Aug 25, 2015, 1:29 AM UTC

fredkbloggs wrote: post #44

noonespecial wrote: post #3

Earlier quoted context omitted.

The most egregious example that has happened to me: I had a checking account with a hidden $5 fee if the balance went below $5000 in a given month. I made a big purchase, left the account with about $3 in it and scheduled a transfer from savings for the next day... you know how it played out: $5 fee on the low balance, $50 charge to "borrow" the $2 all taken from the transfer the next day. They call that a "service".…

Couldn't wait until the next day to make the purchase? Couldn't use cash or a credit card instead? You're an adult. You're obviously literate or you couldn't be posting here. Unless these fees were not disclosed to you (a MAJOR breach of the law if true), you had every opportunity to know that this would occur and to prevent it. Try taking responsibility for your own actions.

You can't imagine a scenario where a responsible adult has had a checking account with a balance over $5000 for many years and has never run in to the charge for dropping below that level, eventually forgetting about that $5 fee? Now if you managed to picture that and believe it's possible for a responsible adult to forget about an obscure fee his bank has never charged him before, try to imagine your home's AC goes out in the middle of August when it's 100 degrees out. Now you're stressed out but you've got enough money in checking to cover the replacement that day, so you call somebody out to replace it and schedule a transfer from savings the same day. Can you maybe see just a little how a mistake like that could happen to a responsible adult? Do you have every possible fee your bank charges committed to memory?

And finally, are you trying to add anything to this discussion or just displaying your self-righteousness?