Overdraft anger? Call Congress
I'll get to that in a moment, but there was really a second message that the CFA and the Center for Responsible Lending, which had a representative at this conference, wants to get out: If you're truly fed up, call your Congressman or woman and ask them to get behind two bills circulating in Congress that intend to put much more severe restrictions on overdraft fees.
OK, the poll.
The questions asked were inspired by what's being debated in Congress right now.
On ATM withdrawals, the idea of requiring banks to disclose on the ATM screen when a withdrawal will overdraw the account: 86% approved of the idea; 10% don't approve and would apparently rather be surprised later; the other 4%, they don't say, but perhaps they hadn't made up their minds yet.
Requiring banks to process transactions in the order in which they are received: Again, 86% in favor; 10% are against that idea; that leaves 4% who gave no answer. I'm starting to think the 10% are bankers.
Requiring banks to get the permission of a customer before routinely covering overdrafts on checks written, debit card use and ATM withdrawals and charging them a fee for each overdraft: That's kind of cumbersome language, but basically do you want banks to charge you for overdrafts? 74% say no; 21% say yes.
Limit overdraft fees charged to one per overdraft: In other words, if you have a bad day, would you like just one fee instead of one fee per charge? 72% vote yes; 21%, no.
Require overdraft fees to be related to the bank's cost of providing the service: As in, if costs $5 to cover a $3 mistake, should it be a $5 overdraft fee or a $39 fee? 65% like that idea; 26% are pretty happy with the way things are.
Limit overdraft fees charged to one per month and a maximum of six per year: 63% say yes; 31% say no.
The last part, I found interesting. As someone who has long rallied against overdrafts in my posts for WalletPop and would love to see them limited, I understand where the 31% are coming from. It's hard to imagine not having overdrafts, and wouldn't this send a message to consumers that you can be irresponsible with your money? Or could this destroy our banking system, as they suddenly lose much of an important stream of revenue?
Perhaps not. Rebecca Borné, policy counsel for the Center for Responsible Lending, mentioned in response to another reporter's question that "if you look back just 10 years ago, banks were receiving far less revenue from overdrafts... Certainly, they haven't always been this reliant on overdraft revenue, and we would expect that they wouldn't be so reliant again."
And as for being wildly irresponsible, obviously if people spend more than they have at the bank, the bank can refuse to let checks and debit charges go through. So while I understand why some people may feel that there should be no limits on overdrafts, the more the merrier if someone spends more than they should have, I think Borné makes a good point. Overdraft fees, at least in the form that we see them today, are still relatively new to the banking world.
"These are back end fees," she said. "People don't expect to be paying these fees, and they don't shop for banks based on these fees, so there's very little incentive for banks to lower them to be competitive."
"Right now, 24 billion dollars are coming out of the pockets of mostly low to middle income consumers," said Jean Ann Fox, director of financial services for Consumer Federation of America. She then pointed out that nobody who gets slapped with these overdraft fees are first given "truth-in-lending disclosures" and adds that the fees are always paid from, from the person's next paycheck: "This is a form of extremely unfair credit."
So if you aren't happy, call or write your Congressperson and tell them to support the bill, the Overdraft Protection Act, H.R. 3904, being championed in the House by Congresswoman Carolyn Maloney and the Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act by Sen. Chris Dodd.
And, of course, if you're pleased as punch with the way things are going, you can always call your Congressperson and tell them that, too. If you don't know where to find your Congressperson, you may want to check out the Web site Contacting the Congress.
Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the new book Living Well with Bad Credit.