Overdraft Loans Drive Everyone Crazy
This post originally appeared on Caveat Emptor.
Above, watch the trailer for Karney Hatch’s “Overdrawn!”, a documentary which chronicles his fight against absurd overdraft fees. In his journey, Hatch ends up talking with several AFFIL Partners as well as Ralph Nader. He currently has an action posted on Change.org (a fantastic social network) where you can show your support for H.R. 1456, the Consumer Overdraft Protection Fair Practices Act. AFFIL supports this bill, and signed on to joint Congressional testimony (PDF link) about it last week with eleven other groups.
In other overdraft news, the Center for Responsible Lending recently released a study showing that a full 83% of the population wants to be able to choose whether or not to be enrolled overdraft “protection.” This is not particularly surprising. Most people don’t like to be automatically enrolled in anything, especially a “protection” plan which annually drains $17 billion from consumers. The average amount overdrawn by consumers is $17, but the average fee for each infraction is $34. This is obviously a cash cow for the banks. (See also CRL’s funny one-minute video about overdraft loans, Hungry Hungry Banks.)
We’ve heard nightmare stories from AFFIL Members about this practice. One person paid $35 for a cup of coffee, while another paid over $500 in fees in one day for approved charges. Overdraft protection is closely associated with the tricky way many banks order transactions. Ordering them from highest to lowest increases the chances of multiple overdraft fees, since once your account is in the red, they can charge you $34 for each charge – no matter how small.
The Federal Reserve Board is currently taking comments about overdraft lending. They are considering implementing a new rule that would require financial institutions to get explicit permission before enrolling their account holders in an overdraft system. The deadline for comments is March 30, and you can send them your thoughts and your story here.