The Daily Kos has a good summary and explanation of a local TV consumer report on how banks manipulate the timing of deposits and withdrawals in order to generate overdraft fees.
Stuff like this is why I am not a full-blown, drank-the-Kool-Aid libertarian. Obviously, the ordinary consumer needs protection from this sort of nonsense. It took the near meltdown of the economy to scare enough legislators to take a stab at reform.
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Billy Dennis is a former reporter and editor at small daily and weekly newspapers in Illinois and Missouri. He comments on media, news and politics. He also owns and operates The Blog Peoria Project, which promotes community-based citizen journalism in his hometown, Peoria IL. Call me at (309) 863-5748 and leave a message.
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Nobody is forced to do business at a bank. If the banks didn’t have the protection of the government and the FDIC the bad banks would be weeded out pretty quickly. Any bank making very much on overdraft fees won’t be in business long–there are too many other banks out there.
Here’s the problem: Banks don’t TELL customers they do the manipulation described in this report, limiting consumer’s ability to make an informed free market choice.
James Lansberry wrote: “If the banks didn’t have the protection of the government and the FDIC the bad banks would be weeded out pretty quickly.”
There was no FDIC insurance in 1929, but the runs on banks from 1929 to 1933 were responsible for much of the damage done by the Great Depression.
If there had been no FDIC in fall 2008, I am as certain as I can be about anything that there would have been runs on banks then, too, possibly leading to another depression.
Of all the government intervention in the financial system since FDR took office, none has done so much good at so little cost as the FDIC.
Before passage of the 1991 Truth in Savings Act, it wasn’t even possible to compare the interest on bank savings accounts and CDs because the banks all used different methods.
If the Gramm-Leach-Bliley Act of 1999 hadn’t repealed the Glass-Steagall provisions prohibiting commercial banks from doing investment banking, last year’s meltdown probably wouldn’t have occurred.
Why does the government make everyone drive on the right side of the road? It takes away my God-given right to choose.
Preventing huge financial institutions from ripping off consumers is a tad different than than telling an architect what size fountain he has to install. This is a legit function of government. Now that THAT has been established, the only question is whether these proposed rule changes are good or bad for the economy.
“Now that THAT has been established, the only question is whether these proposed rule changes are good or bad for the economy.”
Whose economy? Banks have shown in recent years that they’ll screw you if they can find a way to do it. If everyone lived by the Golden Rule, we wouldn’t need governments at all. But that’s not the world we live in.
This is why you should put your money in a credit union instead of a bank. I used to work at CEFCU and I can tell you that they do just the opposite of what Kos reported about banks — they clear checks from smallest to largest so as to minimize overdraft fees for their members.
I banked at the Journal Star Credit Union for many years. Now that I’m retired and living in Woodford County, it’s not very convenient. There are no credit union outlets in this town.
Another solution is to just keep more money in the bank in the first place, a ‘pad’ if you will. We have always done this and have never fallen victim to any of this nonsense.
Are the banks being predatory upon those who cannot manage their money well? Yeah kinda but if they keep flirting with a zero dollar balances, maybe the problem is their own fiscal discipline.
Before someone goes there… yeah many folks live pay check to pay check. Been there done that. You have to discipline yourself in that some money is absolutely UNTOUCHABLE period.
I am not saying these sort of practices shouldn’t be regulated but there is a common sense fix that any bank account holder can practice. If banks can’t make money doing it, then competition might drive such practices away.
CJ is right about CEFCU, no silly games there.
I agree, Mahkno. There have always been plenty of people who were not good at keeping a running checkbook balance. The rampant use of debit cards (I don’t own one, I don’t want one) probably makes it virtually impossible for the average person to know what’s in his or her account on an ongoing basis.
Not if you bank at CEFCU.
My wife checks our balance online on a daily basis. I went to Walgreens yesterday and used a debit card. I called her maybe 2 minutes after leaving to tell her the amount and it was already debited on our online account.
Cool yet creepy at the same time.
And Bill, favor to ask you.
Could you take that chat box posting out? Every time you click on a link from your blog and try to come back, the page automatically goes to that chat box posting.