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The most profitable source of income for banks? Overdraft fees

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

#91

Post by Touche »

geofft wrote: post #75
Touche wrote: post #15

Earlier quoted context omitted.

> form of fines for overdrawing their checking accounts. Why in the world shouldn't you be fined for overdrawing your checking account? A checking account is not a loan, am I wrong in thinking this quote is B.S.?

What is the purpose of a fine? Before we discuss further why one shouldn't be fined, can we make sure we agree on why one should ? Off the top of my head, I see "dissuading behavior that negatively impacts the bank", and that doesn't seem to justify a fine in this case, but maybe you're thinking of a rationale for a fine that I and maybe others are not thinking of.

> Off the top of my head, I see "dissuading behavior that negatively impacts the bank", and that doesn't seem to justify a fine in this case, but maybe you're thinking of a rationale for a fine that I and maybe others are not thinking of.

Great! Someone that wants to participate in reason and not just boisterous proclamations. I'm down.

So yeah, I agree with your definition and it applies in this case because the bank is negatively affected by having to shift money from other accounts to cover your overdraw.

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

#92

Post by EGreg »

Many times in the past, I've learned the hard way that when you ask the bank to STOP paying any charge that would take the account negative, they say OK but then have enough loopholes that the request is essentially meaningless. They STILL apply the overdraft and there's no way to turn it off! I thought laws were recently passed to prevent this behavior, but I guess not.

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

#93

Post by jellicle »

zacwest wrote: post #50
worldadventurer wrote: post #46

Bank of America had some pretty bad practices where they would reorder the sequence of debit transactions, largest amounts first, to maximize the number of overdraft transactions: "the bank mixed up the order and delayed the timing of debits and transactions to maximize the possibility customers will overdraft accounts". They got sued and settled for $410 Million in 2011: http://www.bloomberg.com/news/articles/2011-0…

Their argument for doing is compelling. They figure larger purchases like rent or car payments should go through above smaller ones. It feels like the person doing the reordering was a different person from the one setting charges.

Err, their explicit practice is to send through ALL purchases; that's sort of the point of milking the overdraft cow.

The person doing the reordering is exactly the same one setting the charges. The reordering is done to maximize profit.

"Bob, here are five transactions. You must process them all sequentially. No law regulates the order you must process them in. They were received in order A,B,C,D,E, however you need not process them in that order. Processing them in the order C,D,B,A,E maximizes the profit for us, your employer. What order should you process them in, Bob?"

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

#94

Post by danharaj »

bedhead wrote: post #62
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…

There is a cognitive overhead to managing every predatory relationship. The poor have to deal with many, many predatory relationships all the fucking time. People make mistakes and extremely powerful people and institutions exploit them as much as they can when they do.

Good on you for being able to say that you were poor, in the past tense. I'm glad. I don't think people are stupid just because they stay poor. When you call people stupid because they suffer and can't catch their breath or get their affairs in order because human institutions are structured in the most hostile, alienating, predatory way they can get away with, you start seeing stupidity wherever you ought to see compassion and empathy.

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

#95

Post by fideloper »

bedhead wrote: post #62
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…

Sounds like victim blaming. To an extent you're right, but the situation is not at all this black and white (like anything in reality).

Take for example just the fact that it's easy to lose track of your current savings especially without ready access to the internet, a common situation for the low income.

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

#96

Post by bradleyankrom »

djloche wrote: post #25
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…

I wish USAA would open their net a little bit to extended families. My brother is a doctor in the US Navy, but that supposedly wasn't 'close' enough of a family relation for me to qualify to do business with them.

Navy Federal CU is also very good, it may be worth checking their membership requirements.

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

#97

Post by joshuak »

A. Use small claims court. I have. It is very successful. The more who do it the harder this abuse will become.

B. It is the banks responsibility to maintain an accurate accounting of funds deposited with them.

A customer has no mechanism to instantaneously check their balance, and 'hold' funds for a transaction, or if unavailable avoid the transaction.

The bank does. It is the debit card system.

They, not you, are responsible for using the systems they have to avoid accounting errors.

No one should be made to feel guilty because they are poor, or for failing to keep a ledger that only a bank has the ability to keep.

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

#98

Post by rdl »

bradleyankrom wrote: post #96
djloche wrote: post #25

Earlier quoted context omitted.

I wish USAA would open their net a little bit to extended families. My brother is a doctor in the US Navy, but that supposedly wasn't 'close' enough of a family relation for me to qualify to do business with them.

Navy Federal CU is also very good, it may be worth checking their membership requirements.

Navy Federal CU and Pentagon Federal CU are both awesome and it's a $25 membership in an affiliated charity to get a membership.

The really elite one to get would be Tower Federal CU (the NSA's credit union); there is an affiliated nonprofit, which I joined, but then when I applied to open an account, I was declined. Oh well.

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

#99

Post by fredkbloggs »

cookingrobot wrote: post #54
Touche wrote: post #39

Earlier quoted context omitted.

It's absolutely consensual; it only happens if you overdraw your account.

They're not asking for a loan, they're asking to withdraw their own money that they put in the bank. The bank deliberately chooses to turn this into a loan if they accidentally ask for more than is currently there.

Let's talk about the word "accidentally".

Suppose I drive to a bar, have three beers, and drive home. I don't bother to check my BAC; I just assume I'm below the legal limit and can drive safely. On the way, I accidentally run over a budding young Progressivist on the street, who then dies. When the sheriff shows up, he finds that my BAC is 0.09 -- just over the limit!

Surely, you will agree that any penalty I am assessed for this should be minimal. After all, I did not intend to kill anyone. I did not think I was drunk. Sure, I didn't bother to check, or to assume the worst and take a couple hours' break before driving. But it was an accident. I didn't know that I was over the limit. Maybe I hadn't even read the law, and didn't know what the limit was, or what the penalties would be for exceeding it. Obviously, any big, mean, nasty "justice" system that would impose a heavy penalty on me for this act is evil and unethical.

Right?

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

#100

Post by CydeWeys »

jellicle wrote: post #74
karamazov wrote: post #45

Earlier quoted context omitted.

Banks make keeping track of the money in your account intentionally difficult. You can't just check your balance and assume that you can spend what's there. Instead, your balance includes only processed transactions, whereas your account also has a list of pending transactions that can hit your balance at any time. Pending transactions can also disappear from your account, only to come back as a confirmed transaction…

> e.g: if you have $10 in your account, and you make a $3 purchase, a $4 purchase, and a $12 purchase, they'll run the charges in the order of $12, $4, and $3, hitting you with three fees instead of one. Even better, if you have $10 and also a $500 paycheck hitting your account that night, which is to say that the bank KNOWS there is no overdraft and that you have the money in the account, they'll process them in thi…

I believe there is now a national banking regulation in effect that requires all credits in a day to be processed against your balance before all debits. So in your second situation, at least, you would no longer be hit with fees.
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