Dead Check Bounce: Overdraft Fees + Bailouts = Outrage

Bring on the outrage.


US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s, according to research. The fees are nearly double those reported in 2000.

The finding is likely to increase public hostility towards the financial sector, which has been under political pressure to ease the burden on consumers by increasing credit availability and lending more fairly after being bailed out by taxpayers.

The Federal Reserve is working on rules on overdraft fees, and rules on customer charges could be a priority of the Obama administration’s proposed Consumer Protection Agency if approved by Congress.

Data from Moebs Services, a research company, show that the crisis has prompted many banks to lift charges on overdrafts and credit cards in order to boost profits.

The median bank overdraft fee has this year rose from $25 to $26, according to Moebs, the first time it has gone up in a recession for more than 40 years.

“Banks are returning to a fee-driven model and overdraft fees are the mother lode,” said Mike Moebs, the company’s founder.

"The finding is likely to increase public hostility towards the financial sector" sounds like trouble to me.

While I would hate to side with the banks here, I can't say I sympathize for people running around overdrafting like a motherfucker. Either you balance your checkbook or you don't, and if you can't figure out how to add up your ATM withdrawals every two weeks, I'm sorry but you might be asking for a $35 charge.

$45? $55? How high can the banks go?

However, I find this amusing:

Banks say that the fees compensate for the risk they incur when they pay on behalf of customers who do not have enough money in their accounts. “Overdraft fees are there for a reason, we take on a lot of risk,” a senior banker said. “It’s a service to our customers, they want us to pay their overdrafts.”

A lot of risk huh? Someone double-dipping the last $6.95 in their bank account at Starbucks is not the same sort of risk as loading up on exotic financial instruments which eventually imploded on all of them now is it? I may be sketchy on the details but I seem to recall the taxpayer having to cover that risky little venture for the big boys no?

This isn't the first time banks on the taxpayer IV have caused outrage, of course, and I can't really blame the unwashed masses for getting pissed off since they tend to skim the terms and conditions in typical "worry about it later" fashion.

But you see, kids, the banks are clever and since they aren't all that healthy right now, they've got to tap every vein possible to keep up appearances (federal assistance can only go so far, especially when the government teat is starting to run dry).

Enter transaction sorting!

Let's say you have $50 left in your account and know you are going to be paid in two days. You write three different checks for $15, $25, and $100. The bank can choose to clear the $100 check first - instead of the $15 and $25 checks first, which would leave you with only one overdraft fee and (-$60) - and levy two overdraft fees against you.

This has been standard practice for banks, of course, and they defend the behavior saying customers prefer it this way. Huh? Apparently larger checks, like mortgage payments, are more important than littler fees racked up at the 7-11.

Bwhahahaha that's laughable, are people really still paying their mortgages? Suckers.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.