Stop Banks from Hurting Consumers with Overdraft Fees sign now

Stop banks from charging outrageous overdraft fees!

Think twice before you use your bankcard!

Unless you live in a cave, there is a really good chance you live within a few miles of a bank which offers you "free" bank accounts when you sign up with them. Offering free accounts has pretty much been the new fad for the last couple years. Of course, what they don't tell you is that all of their other service fees have doubled! How is this going to hurt you, if it hasn't already?

Banks have this really convenient policy called overdraft protection. If your bank is anything like mine, you automatically receive overdraft protection when you open the account. They don't tell you that you can opt out of the "protection", and if they do it is buried within 25 to 50 pages of fine-print and other legalese that requires a supercomputer to decipher. Please note: I am not referring to the protection linked to separate accounts or other lines of credit which may have no fee. I am talking about the protection offered when you have no other overdraft protection and you accidentally spend money you don't have in your account.

What is overdraft protection? Let's say you have $50 in your account and you need to make a $55 charge to your bankcard. Instead of rejecting your transaction, your bank will pay it and charge you a overdraft fee. This fee can range anywhere from $20 to $40, plus the amount the bank "loaned" you (in this case, they loaned you $5). In my personal experience, I have never seen a overdraft fee less than $30.

Now, on the surface this sounds like a great feature. Anyone can afford to pay $30 once in a while especially if the purchase is an item you truly need (let's say you are picking up a prescription). But what about when the overdraft is an accident or they are compounded? If your bank is "protecting" you, you may easily see charges in excess of $30+ per overdraft, no matter how miniscule the overdraft might have been, and no matter WHY the overdraft occurred. You can overdraft $.25 cents and end up paying an overdraft fee of $30+. That is ridiculous.

If you think this is crazy so far, it's just the beginning. Banks have another undisclosed policy which practically guarantees multiple overdrafts! What!? I'm not kidding and this should be a crime! Here is what they do:

Let's say you have $50 in the bank, but you mistakenly think that you have $65. So, you do what you always do: Put $10 in gas, spend $5 on lunch, and perhaps you pickup your $45 prescription on the way home from work, thinking you will be left with $5.

Now, logic suggest that the gas station should get their money first, followed by your favorite fast food joint, and then the pharmacy, because that is the order that YOU paid them, right? But remember, you really only had $50, and using this example, you would THINK there would only be ONE overdraft fee. It would look something like this:

Starting balance of $50
Subtract $10 for gas = New balance of $40
Subtract $5 for lunch = New balance of $35
Subtract $45 for prescription = New balance of (-$10 + -$30 overdraft) = -$40

Oops! You went $10 negative so now you owe $30 fee plus the $10, for a total of
$40, right? Wrong! This is not how it works. If you have multiple items that are going to post the same exact day, the bank takes them from greatest to least! In real life, THIS is what happens:

Starting balance of $50
Subtract $45 for prescription = New balance of $5
Subtract $10 for gas = New balance of (-$5 + -$30 overdraft fee) = -$35
Subtract $5 for lunch = New balance of (-$40 + -$30 overdraft fee) = -$70

Now your final balance is -$70 when you started with $50 in your account! By time your pay the fees, you just spent $120 when you only truly needed $60. And, the bank does this on purpose so they can charge you overdraft fees! Now, what if you had used your bankcard for one more item? What if that same day you purchased a $2 snack during your work day? They would pay it, and you would now have a balance -$100 (or less)  when you only needed to spend $62. For every transaction that posts on this day, you will pay $30+ in fees resulting in a nightmare especially if you have a limited income as it is!

Now, I know what you're thinking: If you manage your money properly, you will not see so many overdraft fees. While you are probably right, that does not mean it is fair or even moral to charge such outrageous fees! Bank fees will often EXCEED the amount of the actual overdraft. Why should anyone be forced to pay $30 or more for what is in essence a $5 loan (or less)? We have laws that regulate interest for just about every other type of loan. As far as I am concerned, banks are getting away with theft and NO ONE is doing anything about it!

Furthermore, according to BusinessWeek, research shows that this problem is "becoming commonplace as more banks turn to service fees to maintain their profits as the mortgage boom subsides. Overall, banks raked in $32 billion in account service fees last year, up from $21 billion in 1999, according to SNL Financial, a Charlottesville (Va.) research firm. At some, fees have become such a powerful source of profits that they exceed earnings from mortgages, credit cards, and all other lending combined. At TCF Financial Corp. in Wayzata, Minn., for example, such fees represented 76\% of profits in 2004, up from 52\% in 2000."

The same article continues to say "Most troubling to consumer activists is that most of the new fees fall on the poorest consumers. Many banks provide truly free services to wealthier clients in order to hang on to their assets. Mason, for one, thinks the poorest 20\% of the country's 135 million checking customers generate 80\% of the $12 billion in annual overdraft fees."

Read the full story here:Banks: "Protection" Racket?

This is just another way that the poorest Americans have to pay the price for, well, being poor. They get the worst health care, the worst education, and now they get screwed by banks too. Of course, this problem reaches into middle class America as well. So let's put a stop to it, starting RIGHT NOW.

These banking policies need to STOP NOW before anyone else can be hurt financially. Everyone needs to sign the petition below to help protect themselves and others from unfair banking practices and penalties. It's your money, and it's time for banks to earn it.

Don't stop with signing this petition... Contact your local Government representative and tell them you are outraged! Then tell your friends, family, and simply spread the word. Please don't wait until the banks take YOUR money. Hundreds, if not thousands, of people are being treated like this every day!

The undersigned want the following:

For banks to reimburse these overdraft fees. They are excessive and are hurtful to consumers.

For the overdraft fee structure to be regulated by the government and be in proportion to the overdraft amount

Overdraft fees should never exceed the amount of the overdraft (this point may be negotiable as long as the other points are met)

Overdraft fees should have a CAP or "upper limit" -- No matter how many overdrafts, you should never have to pay more than this amount (this amount is to be negotiated) once your account has been overdrawn. Note: This point applies to the overdraft fee only, not the overdrawn amount.

When possible, all transactions should POST/finalize in the order in
which they were placed to eliminate excessive overdraft fees

When this is not possible, they should post in order from LEAST to GREATEST to protect the interest of the consumer. This point is not negotiable.

Outstanding overdraft fees should NOT prevent you from opening a new account at another bank. However, banks to whom you owe fees may choose whether or not they want to conduct business with you until outstanding amounts are paid.

Full disclosure of all fees in "plain English" when new accounts are opened.

Overdraft fees should be waived after a specified period of time, without any negative impact on the account holder's credit rating, as long as the "principle" amount has been paid.

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Kristen ObrienBy:
Culture and SocietyIn:
Petition target:
U.S. Congress


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