Tuesday, April 8, 2008

Overdrawn... The Seemingly Perpetual Cycle Of In and Out of Debt

I don't know about you, but I sometimes feel as though my life is dictated by my relationship with the bank that alternates between only two possible situations: the instance in which they hold my money and the one in which I owe them money. It seems as though there is a balance so delicate between these two that it's nearly impossible to achieve a stable and lasting security within that relationship. But there's something about it that doesn't feel right. I mean, I suck at handling money but I'm capable of learning a lesson, especially after overdraft fee #68. Alas, it may be time for a breakup, and this one might be awkward because, as it turns out, it's not me--it's them.

For those who can relate, and for anyone currently involved with a bank, these may be things you know already but it never hurts to remind yourself of who you're dealing with and to be sure to, erm, check yourself before your wreck yourself--financially speaking.

These facts were taken from the site for the documentary film above -- overdrawnmovie.net:

-- Banks make approximately anywhere from $17 to more than $50 billion per year (depending on who you talk to) from Overdraft (or Non Sufficient Fund, NSF) Fees, which represents roughly 30% of their fee revenues. Almost all of this (80% by one estimate), comes from low-income consumers. In the case of Washington Mutual, they make about $1 billion from their 10 million checking account customers, which comes to about $100 per customer, per year. These accounts are advertised as "free checking".

--Though the banks continue to call overdraft charges 'fees', they are in fact loans (which is stated in three different places in documents of the Federal Reserve and the Office of the Comptroller of the Currency), which means that they should be covered under the Truth in Lending Act. A loophole currently exists which allows them to continue to call advancing credit to consumers 'fees'.

--Banks have been chastised by the US Government for misleading advertising practices, insuffiently informing account holders of the nature of their "Overdraft Protection" programs, and turning an old system of ad-hoc bounced check policies into a major new sourc of revenue.

--The average NSF fee has more than quintupled in the last twenty years, from around $4 to more than $20. Read more!