The announcement yesterday by the Bank of America and JPMorgan Chase that they would end some of their most egregious abuses in the overdraft check protection racket is a press victory, plain and simple.
As we’ll see below, the financial press, bloggers, personal finance writers, not to mention our own Ryan Chittum, have been shining a light, beating the banking industry about the face and neck, on its sneaky and deceptive post-crash post-bailout practices since at least April. It takes a lot to embarrass too-big-to-fail banks, but apparently public opinion still counts for something.
For an idea of the problem now solved, one only needs to glance at what the banks have agreed not to do anymore. For one thing, banks will allow customers not to buy the protection that levies hefty fees on overdrafts:
According to the Times today (my emphasis):
Bank of America said it would allow current customers to turn off the ability to spend when their account hits zero, starting Oct. 19…It will let new customers choose whether they want overdraft protection when they are opening their account.
In banking circles, this is considered a breakthrough. Ken Lewis, come on down, ya big lug. All is forgiven.
As for Chase (my emphasis):
Instead of lumping a day’s worth of debit card and A.T.M. transactions together and then processing the highest amounts first — a practice that has caused large numbers of consumers to overdraw more quickly and pay more fees — it will credit the transactions chronologically.
Chase also plans to allow customers to opt out of overdraft coverage.
Jaime Dimon, you, sir, have a big heart.
Here is a flavor of the attention the press has given to this topic:
Felix Salmon at Reuters: “Usury datapoint of the day,” April 10
The Wall Street Journal: “Bailed-Out Banks Face Probe Over Fee Hikes,” April 13.
USA Today: “Banks’ ‘courtesy’ loans at soaring rates irk consumers,”July 10:
The WSJ’s Karen Blumenthal: “How Banks, Marketers Aid Scams,” July 15.
The Times: “Overspending on Debit Cards Is a Boon for Banks”, Sept. 8.
How can anyone keep track of all this coverage? While he himself is no doubt too modest to accept any credit, our own Ryan Chittum, ladies and gentlemen, the “Oracle of Tulsa,” has been on one long prairie populist Rebel yell about this for months.
Send your own honor roll entries to firstname.lastname@example.org.
A few lessons here, Audit fans:
1. Nothing beats drumbeat, accountability-oriented press coverage to focus public opinion on an important issue and bring about reform. Lippmann would be proud.
2. After sleepwalking on everything from credit cards to the mortgage crisis itself, even after the fact, if financial journalism is now fully awakened to the banking industry’s dramatic shift over the last decade or so, from an underwriting paradigm to a sales paradigm, that is all to the good.
3. This is yet another reminder of the happy symbiosis between uncompromised government oversight and the business press. When regulators regulate, and the press covers them, amplifies and expands, more information flows to the public, and this is good. The FDIC did an important report on the topic back in December, which USAT duly reported to get things going: FDIC: Bank overdraft fees hit young, low-income customers. The “probe” cited by the key Journal story above by David Enrich, Marshall Eckblad, Maurice Tamman, was done by Elizabeth Warren’s Congressional Oversight Panel.
4. Therefore, whatever the economic merits or demerits a Financial Products Safety Commission might offer, the thinking here is that it would be good for business journalism. And, as we all know, what’s good for journalism is good for the country. And, yes, you can take that to the bank.