If You Can’t Beat ‘Em, Legislate
The current policy of Wells Fargo – presumably other banks have similar policies – is to charge a $35.00 fee for any overdraft larger than $1.00 without letting the customer know in advance. Moreover, Wells does not count transactions in the order in which they were made, but deducts larger before smaller amounts. These policies need to change.
Let me explain why by way of a personal anecdote. A few weeks ago, I overdrafted twice in a single day — the first transaction a mere $0.42 and the latter $8.00 – resulting in two $35.00 fees. Normally, Wells does not apply the fee for overdrafts under $1.00. It is also the bank’s policy to waive one fee as a courtesy to customers otherwise in good standing. Based on this information, I assumed that Wells would not count the $0.42 transaction against me, and would waive the fee for the $8.00 transaction. But there was the rub: since the bank counted the larger $8.00 amount first, I ended up paying a $35.00 overdraft fee for a $0.42 transaction. Let me repeat: a $35.00 overdraft fee for a $0.42 transaction. Worst of all, I had no recourse, as representative I spoke with claimed she didn’t make the rules and had no power to change them.
Of course, Wells and other banks have no interest in changing the rules. According to an article in today’s Washington Post:
Moebs Services projects that the industry will make $38.5 billion off the fees this year, up from $18 billion in 1999, in part because the average fee large banks charge for each overdraft has climbed by $10, to $35.
The good news, according to the same article, is that congressional Democrats are seeking ways to crackdown on the overdraft fees as a part of broader efforts to increase financial regulation. As Sen. Chris Dodd described the efforts: “People out there are getting whacked . . . they should have the right to say, ‘Deny me the transaction.’” Indeed, and I would add that the people getting whacked are disproportionately poor, those for whom a $35.00 fee can be crippling. Getting whacked means not realizing that the $7.00 you put in your gas tank to get you to work or the $3.00 you spent on a gas-station lunch overdrew your account. It also means having the $7.00 count before the $3.00 so as to ensure that you get slapped with fees.
George Bush, in one of his rare lucid moments, once said that federal government ought not balance its budget on the backs of the poor. Neither should the banks, and the only way to change that is through legislation.