Overdraft protection: bank courtesy or loan sharking?
Most banks now offer "overdraft protection," a service typically packaged as a courtesy for consumers, a little extra benefit to help you out.
But a new survey by the excellent Center for Responsible Lending shows that, looked at another way, overdraft loans are just another form of predatory lending by financial institutions which hurt the most economically vulnerable:
Click here to read the full report on overdraft loans (pdf).
But a new survey by the excellent Center for Responsible Lending shows that, looked at another way, overdraft loans are just another form of predatory lending by financial institutions which hurt the most economically vulnerable:
A nationwide survey shows that low-income people, single people, and many people of color are increasingly turning to borrowing money from financial institutions by over-drawing their checking accounts, racking up interest rates that can exceed 1,000 percent.This is no small deal -- it's one of many lending abuses that cause some $25 billion a year to be lifted from the pockets of the poor and working class by elite financial institutions (who are some of the biggest political contributors, helping stave off effective regulation).
A telephone survey of 3,310 households done for the Center for Responsible Lending shows that a mere 16 percent of bank customers account for nearly three-quarters of all overdraft loans.
"A service created as a favor for customers has morphed into a harmful practice that traps vulnerable customers in debt," said Eric Halperin, a senior policy counsel at the Center. "Some banks now realize that trapping borrowers and charging them a $25 fee for a $20 overdraft loan is a pretty good scam."
Financial institutions are increasingly turning to fees to increase their income. Of the estimated $10.3 billion in overdraft fees Americans pay each year, the survey indicates that $7.3 billion comes from repeat borrowers.
Click here to read the full report on overdraft loans (pdf).
2 Comments:
I WAS A MEMBER OF THE ALABAMA TELCO CREDIT UNION. THERE WERE NUMEROUS DEBIT TRANSACTIONS GOING ON MY ACCOUNT. INITIALLY I HAD A PART OF MY CHECK DEPOSITED. AFTER SEEING THAT THEY WERE SIMPLY TRYING TO USE ME TO MAKE MONEY I STOPPED HAVING MY MONEY DEPOSITED. I HAD A TRANSACTION LIMIT OF 6, AND SUDDENLY THEY BEGAN TO LET DOZENS OF TRANSACTIONS THROUGH, THIS CAUSED ME TO BE IN DEBT TO THE TUNE OF 400, THEN 700, THEY WOULD NOT HELP ME, THEN FINALLY IT WAS OVER $1200 DOLLARS WORTH OF BOUNCED FEES EVEN THOUGH I HAD NOT ACTIVELY USED THE ACCOUNT FOR OVER 4 MONTHS. FINALLY I HAD A CHECK FOR FEMA COME THROUGH, THIS CHECK WAS SENT THROUGH IN ERROR BY FEMA, THEY FAILED TO ENTER MY NEW BANK INFORMATION, SO ALABAMA TELCO MADE OFF LIKE FAT RATS FOR SIMPLY NOT HELPING ME. I WENT THERE MONTHS AGO TO STOP IT THEY TOLD ME I COULD NOT DO IT UNLESS THEY GOT ALL OF THEIR MONEY THEN. AT THAT TIME THE AMOUNT WAS ABOUT $240. LAST YEAR THEY TURNED AWAY A LEGITIMATE TRANSACTION WHEN I HAD FUNDS IN THE ACCOUNT, THEIR REASON AT THAT TIME WAS THAT I HAD EXCEEDED MY NUMBER OF LIMITS FOR THAT MONTH WHICH WAS 6. WELL THEY CONTINUED TO MAKE MONEY OFF ME AND WHEN THEY TOOK MY FEMA CHECK, I DECIDED TO CUT MY LOSSES, MY HUSBAND BELONG TO NEW HORIZON CREDIT UNION, AND THEY ALLOW THEIR CUSTOMERS TO SIGN A DOCUMENT PREVENTING PEOPLE FROM DEBITING FROM THIER ACCOUNTS AT NO CHARGE, TELCO ARE NOTHING BUT A BUNCH OF CROOKS, AND I BET THERE ARE NUMEROUS PEOPLE EITHER TOO EMBARASSED, OR THEY ARE UNAWARE THAT THIS IS SIMPLY A METHOD FOR THEM TO MAKE MONEY OFF THEIR CUSTOMER, CERTAINLY THE CUSTOMER HAS A RESPONSIBILITY, BUT THAT DOES NOT GIVE THE INSTITUTION THE RIGHT TO TAKE ADVANTAGE OF BAD SITUATIONS, I WISH AN ATTORNEY WOULD INVESTIGATE HOW MUCH THEY HAVE TAKEN FROM PEOPLE EVEN THOUGH THEY CLAIM TO HAVE TRANSACTIONS, THEY DO NOT MIND INCREASING THOSE LIMITS TO EXCESSIVE DEGREES TO PAD THIER POCKETS. IF I DO NOTHING MORE I HOPE TO DETER OTHER PEOPLE FROM THIS INSTITUTION, THEY ARE OBVIOUSLY SO BAD OFF THAT THEY WILL STEAL FROM THEIR CUSTOMERS UNTIL SUCH TIME A LAW OR SOMEONE WHO CAN AFFORD TO FIGHT THEM COME IN AND STOP THEM THEY ARE A VILE BUNCH, AND REMEMBER IF YOU BANK AT THIS LOCATION, YOU HAVE NO RIGHTS, UNTIL YOU PAY THEM OFF. I FEEL SO MUCH BETTER NOW.
alabama telco credit union makes money off allowing overdrafts to accumulate, they do not bother protecting their customers, i tried to stop them when i had over $200 nsf fees to accumulate, they let the $25 dollar a pop flow and flow to the nice tune of over $1200. people protect yourself get a loadable debit card, atleast then you will know what you spend each month, and you do not have to worry about nsf fees, these people helped to put me into a larger financial bind. true it is the responsibility of the customer, and as i said i tried to close it they would not allow it. finally i had a fema check to go into that account in error, they gulped every nickle of it up. i cut my losses and ran to that bank so fast to close it out. had i not done that i feel certain that they would have been getting money from me today. i hope that an attorney will stop those people what they are doing is profiting off the misery of other people. now i can focus on paying the small bills that now that they have satisfied themselves with money that was meant to repair my roof.
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