Wednesday, February 27, 2008

Overdrafting Again



My post regarding my disdain for Overdraft Whiners has garnered a fair string of comments — more than any other recent post on this blog, to be sure.

Readers who consider me to be on the wrong side of this issue ("You're an a#&hole!") will no doubt be up in arms against The System when they get a load of a recent post at the credit- and bankruptcy-related blog, Credit Slips:

Credit Slips: Ripped Off by the Banking Industry

Here's a no-doc, no-income-verification rundown of the Credit Slips article:

Thanks to her participation in the Consumer Bankruptcy Project of 2007, a woman named Erica (not really) was nominated for an additional $100 payout due to her particularly inspirational story.

Erica looks past her own misfortune and sees the positive things in life and others. She is very brave and strong and creative and incredibly unselfish. She takes in stray kittens, cooks home-made soup for her elderly neighbors, rolls pennies to buy gas for her husband's truck, and even gets her antibiotics from her veterinarian if she can, so she doesn't have to spend money on a doctor's visit.


We're told that Erica is 46 years old, a previous BK filer, and afflicted with multiple sclerosis; to her credit, she has already outlived her doctor's initial prognosis by five years. Most of us can only imagine the physical and financial struggles Erica must contend with on a daily basis.

So what happened when Erica got the CBP award check?

She [Erica] got her check a couple of days ago and had her husband deposit it in the bank. They barely cover expenses each week so she was thrilled to encourage him to put more than $10 gas in his truck, pick up some milk and bread at the grocery store, pay a little bit on a bill they owed, and buy another item they needed. Then when she checked their balance at the bank yesterday, they had over $100 in overdraft charges, something like $33 for each of the items he had bought. She called the bank and they said they were holding the Harvard check for 5 days, so it wasn't available for them to spend when he made the purchases.


Well, that's fun. But there's more.

She asked to talk to a supervisor and was transferred here and there and finally she said she was hooked up with someone she was sure was in India, because she could barely understand her. When she insisted that they had never held any other checks on their account, the lady told her that they often do that for checks from out of the country. Erica asked her where the hell she thought Harvard was and then just gave up.


Here We Go...

Once more, Credit Slips author Debb Thorne tells us, greedy banks have seriously overstepped their bounds by charging Erica three separate $33 overdraft fees. Know what I think?

I think: Given what I've read about this, I have great sympathy for Erica's physical and financial situation. However, the overdraft fees — all of them — were valid. (Caveat: This is unless the bank has somehow violated Reg CC. This was noted as a possibility by Adam Levitin, who commented on the post at Credit Slips. But we don't have enough info to know whether this is the case or not.)

"HOW CAN YOU SAY THE CHARGES ARE VALID?" readers will scream. "HAVE YOU NO HEART?"

Hold on. If I were the bank manager, I'd look into the matter. At the very least, I'd educate Erica and her husband on bank policies. And then I'd refund the overdraft fees.

Once.

There is simply no argument about this: Erica needs that $99 far, far more than the bank does. The bank can earn back that $99 quickly from someone or somewhere else. The same cannot be said for Erica and her husband.

Again, this is simply what I would do, if it were up to me. But it isn't.

Erica is likely out that money.

"But they never held her checks before, remember?" people will point out. "How is it right for them to start now?"

Well, I've never read word-for-word the deposit policies of any financial institution I've ever dealt with. Even so, I'm well aware of the likelihood that just because you desposit a check — any check — it doesn't mean you have immediate access to that money. It's standard bank operating procedure, folks.

From my end, I don't try to spend money that I just deposited that same day. Ever. It's called being conservative, and erring on the side of caution.

Admittedly, it's also a luxury that Erica probably cannot afford.

Doesn't matter, though. The bank makes the rules.

Some Questions I Wish to Answer

In the article, Ms. Thorne asks a few rhetorical questions regarding bank fees and such. I'd like to take this opportunity to answer them — from my non-expert viewpoint, of course.

Why in the world is holding a check drawn on a leading bank common practice?


Don't know; don't care. All I know is that it is. And if you don't want to shell out thirty-dollar overdraft charges, you'd better grasp the concept, too. And pronto.

$33 for a single overdraft? What the heck??? Who in their right mind thinks it is acceptable to charge that?


I do. In fact, given the rate at which people continue to not give a crap about how they manage their money, I'd go so far as to say that overdraft fees should go higher.

Banks aren't charities. They exist to make money. Account-holders take heed: If you give most banks the slightest chance, they will bend you over and apply their own special brand of Stimulus Package. The sooner you learn how to avoid this, the better off you'll be.

If my memory serves, checks I write are deducted IMMEDIATELY from my account — thanks to technology, it simply is not possible to float checks anymore. Yet deposits I make are not recognized for days. Why?


Because the banks run the show. Their game; their rules. Suck it up, buttercup, and stop whining.

And why in the world aren't our elected officials calling hogwash on this?


Oh, please. You know the answer as well as I do. Bankers and politicians get along very, very well. Cash, meet pocket.

It's unethical and it should be illegal.


Whatever. When you screw up with your money, when you can't follow your financial institution's policies, then you should pay.

Screw up repeatedly? Pay repeatedly.

The same rule should apply to bankers, of course, but it won't. (See the previous question.)

So go ahead, readers: Tell me how you feel.

Labels:

— Posted by Michael @ 8:40 AM








5 Comments:
 

When you open an account with your bank, you agree to their terms and conditions. Its your responsibility to read them - ignorance is not an excuse.

This has been standard practice (waiting for a deposit to clear) at every bank I've ever used, so I find it really difficult to believe they haven't run up against this issue before.

 

I completely agree with you. When the couple deposited the check, they should have taken a good look at the ATM slip or receipt - it should say what their available balance is, which is net of any holds. I'm sympathetic to their situation, but it's not like the banks are out to get customers. They are for-profit businesses whose primary duties are towards their shareholders. They can't create shareholder value by forgiving overdraft fees or letting checks bounce.

 

I deposited a couple of rebate checks in my Chase account the other day, and the teller pointed out to me that those funds would not be immediately available. We would ALL do well to check our balances before making purchases. I'm going to have my teenage and young adult children read this story - hopefully they can learn from Erica's expensive mistake.

Susan in San Antonio

Anonymous Anonymous
, at 8:34 PM, March 02, 2008  
 

http://www.federalreserve.gov/Pubs/regcc/examples.htm

Most banks that I have dealt with will give you the first $100 of any check that you deposit (at the time of deposit).
If the bank did not note the hold on her deposit slip, then I would say she would have a case about getting the overdraft charges refunded.
In the end, she should know better, and this will be something that she will not soon forget.

Anonymous Anonymous
, at 8:52 AM, March 12, 2008  
 

I'm grateful for overdraft fees. I'd just as soon not have to pay them but there are times that it is the difference between getting to work. I don't hold it against my bank at all.

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