But most relate to income from fees. One strategy listed to boost overdrafts: “Allow consumers to overdraw their … accounts at the ATM up to the bank’s internally set limit.” To increase credit card fees, banks can “delay crediting of payments not received in bank provided envelop (sic) or for which payment coupon is not received for up to 5 days,” and “remove bar coding from remittance envelopes,” slowing the payment.

This is predatory and abusive lending—no two buts about it.

USA Today covers the field here, with a nice consumer anecdote and a former executive blowing the whistle on his industry:

Banks also have their own employees working to find new fees. Jake Drew, a former vice president in MBNA and Bank of America’s “revenue-optimization” group, worked for nearly 10 years with a dozen others implementing credit card policies. Based on this experience, Drew believes regulators need to limit what banks can do — rather than saying what they can’t do.

“Banks have thousands more resources to come up with other revenue-generating ideas,” says Drew, who was fired this year for refusing to sign an employee agreement governing ownership of his work. Bank of America declined to comment.

And the former consultant who helped popularize the tactic who’s now sorry for his sins:

“This practice has gone awry and needs to be fixed,” says Alex Sheshunoff, a key consultant who once advised banks to pay, not return, overdrawn transactions. “This is something everyone should be trying to find a solution to, not fighting”…

Sheshunoff says overdrafts have become abusive and merit tight regulation: “Overdrafts started happening too easily. I’m very apologetic that it morphed into what it (did).”

Good for him.

The piece even has humor, though of the unintentional sort, in the form of industry defenses of their overdraft practices:

Davis of Strunk & Associates says courtesy overdraft is a “value (consumers) are very willing to pay for”…

Fox says the industry shouldn’t apologize for strategies that benefit shareholders: “Let’s not be naïve. Banks are doing things to make money.”

Spokeswoman Anne Pace says the bank wants to help customers but must adjust policies if costs rise.

Scott Talbott, chief lobbyist for the Financial Services Roundtable, representing large banks, says it’s “unfortunate that low- and moderate-income Americans find themselves (using) overdraft services more often.”

Moebs fears that if banks are restricted from charging overdrafts, some may go out of business while others could bounce overdrafts, marring consumers’ credit records.

Yeah, that would be a real shame if companies built on abusive lending go out of business. The only real defense here is that by covering overdrawn accounts, banks protect their customers from point-of-sale fees. But, correct me if I’m wrong, that seems to me at best a wash.

One of the very few things USA Today doesn’t address is how many overdrafts are checks and how many are debit charges. My guess is that the vast majority come from debit cards and that the vast majority of people would rather have their cards declined than pay $30 because they overdraw their account by fifteen cents. Credit cards have also gotten into the overdraft action, too.

But that’s not to take away from this great story. This is really fantastic journalism by Chu and USA Today. More like this, please.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.