The Federal Reserve is effectively banning the “overdraft protection” racket on debt cards by forcing banks to make customers opt-in to such a “service.” Almost nobody really wants a service that on average costs you $368 a year, for letting you overdraw your account by twenty cents or whatever. Here’s betting it goes the way of the dodo—assuming the marketers aren’t allowed to deceive people into doing it—something the press will need to pay attention to.
So here we have this comment from the banking lobby in The New York Times:
“I would suspect that many community banks will simply stop offering overdraft protection to avoid the costs and penalties of complying with the rule,” said Camden R. Fine, president of the Independent Community Bankers of America, which represents about 5,000 financial institutions. “If that happens, it will not be the banks that suffer as much as it will be the consumers and small businesses that have taken bounce protection for granted. In many ways this rule and proposals in Congress turn back the clock 25 years and deny a service that was demanded by the consumers in the first place.”
Now, what would be the costs of complying with the rule? Printing up new terms and conditions pamphlets? You’re going to have to do that anyway, bub, and you do it at least a couple of times a year when you change some term on your credit cards. And wouldn’t you only get penalties for not complying with it?
In other words, that’s utter BS. Unwind the illogic in Fine’s last two sentences there. So if this were really a service “demanded by the consumers in the first place,” a horde of them would be knocking at the doors on August 15, when the rule goes into effect, steadily intoning “open, open, open” like that old Mervyn’s commercial (c’mon, YouTube. Where are you when I need you?). They won’t be. That’s why lots of banks haven’t even let consumers switch overdraft gouging off.
They’re getting $25 billion to $38 billion a year of super-high-margin revenue from overdraft charges, led by debit and ATM fees. The practice is profitable enough that even if just 5 percent of customers switch it back on, the banks will be more than happy to let them do it.
The Times doesn’t counter this spin, though, letting it sit there. That’s not cool. Maybe it thought the statement was so ridiculous it didn’t need countering.
I don’t think so, but to put it in context, see the comment from the main banking lobby in The Wall Street Journal, which unlike the Times puts the news on a section front:
“This new rule addresses the primary concerns that have been raised by consumers and policy makers and will help bring consistency and clarity to overdraft programs,” said Ed Yingling, head of the American Bankers Association, a trade group.
Even the ABA can’t bring itself to argue against it.