Regulation

Good-Bye, Free Checking. Thanks a Lot, Consumer Protectors!

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Next up: A federal ban on ATM fees!

It was just terrible that the fine print of free-checking accounts included language saying "We will charge you for overdrafting your account, loser," a sad fact easily divined by, for instance, overdrafting your account. So, consumer advocates, noble regulators, and other champions of the little guy came up with a genius solution: require banks to obtain letters from customers saying "Please charge me a lot of money when I write a bad check." The result?

Bank of America Corp. and other banks are preparing new fees on basic banking services as they try to replace revenue lost to regulatory rules, in a push that is expected to spell an end to free checking accounts for many Americans.

Hooray for progress! Back to the mattress!

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  1. Looks like more regulation is needed.

  2. B of A must have donated to the Reason Foundation this month.

    1. Don’t be his porn.

    2. Your stunning intellect has convinced me that libertarianism and abject worship of the so-called “free market” are intellectually and morally bankrupt. Thank you for helping me see the light.

  3. Surprise! I wonder how Chony will defend this…

    All we have to do now is wait and see.

  4. We can’t have the banks preying on people who don’t check and make sure they have sufficient funds to cover a check or debit card charge.

    Bad banks!

  5. I knew Reason was in the pocket of Big Bank.

    On top of that, they probably selfishly want to keep their free checking. Tainted advocacy.

  6. Your mattress won’t use your money to lobby for customer-bilking mattress regulations then pretend it didn’t want them that way.

    And you can fuck on it.

    1. Mattress 2
      Bank 0
      Mattress wins again.

  7. Obviously, people who keep enough money in their accounts to cover their checks and withdrawals are sponging off the poor people who don’t.

    /Tony mode

  8. Properly managing your own finances is racist.

  9. Back to the mattress? In this inflationary environment? I think NOT! I will stick with gold, guns, and scotch.

    I suppose…

    1. Don’t forget the beans. You can fire them out of a shotgun too, I suppose, for riot control if need be.

  10. And the small banks (or any bank really) who have free checking will decide to continue to have free checking, and make their money the old fashioned way (via loaning out the money you put in the bank).

    Thus giving banks that keep the free checking a competitive advantage over the ones that do not.

    The market at work.

    1. And the small banks (or any bank really) who have free checking will decide to continue to have free checking,

      Bet not. As the big banks do away with it, the need to have it to get and keep accounts diminishes. As the overdraft fees disappear, new revenue streams will be needed.

      1. Small banks do a lot of things that the big banks don’t. I bet that free checking will become an even more prominent distinguisher.

        1. I certainly hope so. My bank just recently changed hands this last year and I’ve had nothing but trouble the new owners’ policies. They try to do away with my “free” checking and I’ll withdraw my business just like that.

          1. So fast that their abaccus will spin.

        2. Small banks do a lot of things that the big banks don’t.

          Right. But given that low balance checking customers are unprofitable to banks, generally, one thing small banks that continue to offer free checking will do that big banks don’t is: go out of business. Big banks get bailouts when they falter. Think that strategy will work for the little guys too?

    2. Yes, because small banks are most able to absorb the extra costs imposed by this new rule. It’s those big banks with trillions in assets that have a hard time keeping the lights on with the slimmest of profit margins.

    3. Thanks. I was beginning to wonder if I was the only one to grasp that obvious fact.

  11. Back to the mattress!

    Dayum Matt. Can I be EiC of reason?

  12. Hmmm. This may seem like a case of regulation creating costs for ordinary consumers. But, in fact, regulator banking transactions ALWAYS cost the bank someething – they just didn’t charge the good customers for the service. Instead, they displaced the costs to shitty customers who couldn’t easily change banks because they were always bouncing checks. All that’s happening now is everybody is actually having to pay for using banking. What, exactly, is wrong with this? Is it simply that a regulation (unintentionally) forced a reversion to everybody facing the harsh reality of the market?

    1. that should be ‘regular banking transactions’.

      1. Uh, no. If the market decided that “bad customers” would have to bear the costs for the good ones, that’s how it would work.

    2. Uh, sorry to disappoint you Sean, but the banks offer those “free” services to their good customers because they make a lot of money on their good customers.

      The customer who manages his money well is likely to build up large balances and take on those extra services that really make money for the banks.

      Suggest you learn something about an industry before you attempt to analyse it.

      1. Making money by offering services to those that want them and can afford to pay? We need a blue ribbon commission and a czar to end this asap!

      2. I know more than you think. Every transaction costs something, whether you’re a good customer or a bad one. Banks often choose to absorb the costs for ‘good’ customers as a loss leader for those ‘extra services’ that they can charge a lot for. That doesn’t mean bank services cost nothing, or that good customers are now paying for bad ones. It just means everyone’s paying for what they’re getting.

        The real problem is that bank’s net interest margins are getting squeezed and they’re trying to make up the income with fees and charges instead – because margins aren’t covering those costs like they used to. But go ahead: if you want to see a small subset of customers as the cause of these allegedly ‘new’ charges, go right ahead. It couldn’t be years of liquidity mismanagement or capital erosion that is the problem. No. It’s definitely the poor people.

  13. So the argument here is that the banks could be charging people to have a checking account, but don’t?

    Frankly, it seems more fair to charge somebody upfront for a service rather than rip them off later.

    1. Dan T. The community theater of trolls.

      1. Fuck, JW. Community theater doesn’t deserve that.

        1. We had no use for him. So sorry!

        2. You are right; that was uncalled for. I apologize to community theaters everywhere. They actually provide entertainment and a useful service to society.

          He’s more like the public access TV of trolls.

          1. the public access TV of trolls.

            Now you’re just being redundant.

    2. Re: Dan T.

      Frankly, it seems more fair to charge somebody upfront for a service rather than rip them off later.

      I agree – just like Obmacare, where we get the taxes now to pay for the service later . . . and then get raped. I mean, ripped off.

    3. I enjoy free-loading off of the financially stupid.

  14. Guess I don’t die easily, eh?

    In any case, the plus side is that this will lead to less spending and more saving on the part of consumers. If you complain about that, then I’m surprised. I thought we weren’t Keynesians.

    1. So let me get this straight, you believe that always paying a fee for checking vice only paying a fee when bouncing a check will encourage people to save more and spend less? Not sure I see the connection… I think this will result in more bounced checks since they no longer cost as much.

  15. It’s fashionable to kick capitalism when it’s (supposedly) down. Same old story. Good thing those capitalists donate heavily to the craven regulators’ campaigns, or there might be a bloodbath.

  16. Properly managing your own finances is racist unAmerican.

    1. If you say so.

      :)))

    2. Absolutely! And we need to set up a $20 billion escrow account so we can be assured these evil banks pay for the damages caused to those who never learned to manage their own finances.

      1. Creech:

        Don’t you mean $20 trillion?

        1. $20 billion is a floor, not a ceiling.

  17. Hmm. I’d never thought of this before, but what this means is that careless people (or broke people) who overdraft their account are paying for the “free” checking accounts of everyone who is responsible enough not to overdraft. So (mostly) poor people and/or people who have money problems are paying for the free checking accounts of rich people.

    You can see why regulators are taking action. Now if only they would apply a similar metric to things like sin taxes which disproportionately effect the poor.

  18. What an incredibly tone deaf post. The problem is NOT, as most of you seem to think, that banks charge a reasonable fee when someone carelessly overdrafts their account. The problem is that once the account balance goes below zero, banks continue to accept debit transactions and automatic drafts. In my mother’s case (due to an oversight), it was to the tune of $700 in actual charges and fees. What happened to those days when you submitted a check and it bounced and the account became unusable until the balance was positive? What happened to the policy of saying “transaction denied” when a debit transaction is presented and they’re not enough money to cover it?

    A debit card != a credit card. When the balance on a debit card is too low a transaction should be denied. If the banks want to give all of their customers credit cards to run up, then the fees need to be reasonable, not $36 for a lousy cup of joe.

    1. So banks are supposed to cover for people who are too lazy or ignorant to actually keep a checkbook and make sure they have enough $ in their accounts to make a purchase?

      If things were switched, people would be complaining about how the bank cruelly denied their charge and how embarassed they were that the bank would have such nerve.

      1. Let them complain. If you screwed up and you don’t have money, you don’t have money. Why is it OK for the bank to continue to accept transactions for money you don’t have? I can say with certainty that my mother would have rather experienced a few moments of embarassment than ending up in a massive hole because she overlooked an outstanding check.

        1. Why is it OK for the bank to continue to accept transactions for money you don’t have?

          Let me know if I am wrong but I am sure that all of this was spelled out in the contract when the account was opened.

    2. What happened to those days when you submitted a check and it bounced and the account became unusable until the balance was positive?

      I can’t be overdrawn. I still have some checks left. (Those over 35 will understand that joke.)

      What happened to the days when people weren’t such whiny little shits and took responsibility for their finances?

      The banks offered a service. You agreed to it by accepting their terms and used it whether you intended to or not. Feel free to act like an adult and accept your role in the trsnsaction.

      1. I’m not saying people shouldn’t take responsibility for their finances. Rather the opposite, in fact. I’m saying that once upon a time, if you messed up and got in a hole, they cut you off. Soaking people for huge fees so they can pretend they still have money seems pretty unethical to me when they can’t opt out of said “service”.

        1. Not to mention the fact that even if everyone somehow did manage their balances money perfectly the banks would still probably need to charge monthly fees to make up the lost revenue. As the artical says a large portion of the banks revenue comes from overdraft fees. At a cost $250 a year per account, the banks can’t make money off my tiny bank account.

          Is everyone on here really ok with the their accounts basicly getting subsidized by people that have trouble with their money? Especially when they only get fined when they have no money at all?

          It would be great to get my debit card denied instead of paying 30+ dollars for a cup of coffee.

    3. “When the balance on a debit card is too low a transaction should be denied.”

      Uh, that’s how MY debit card works. Then I have to call my wife and have her move some money into my account so I can buy stuff. Luckily, it only takes about 30 seconds, so I don’t even have to leave the store.

    4. Been there, done that. Though never quite THAT bad.

  19. The problem is not that the banks had the nerve to charge when they covered overdrafts, the problem is that they did not give customers the option of not having overdrafts covered. This is a particular problem when using a debit card. Even if you had no money in the account, card transactions would go through like nothing is wrong. As far as I know, banks can still offer overdraft protection and charge fees for it. They just have to offer the option to opt out and deal with bounced checks the old fashioned way.

    1. Or you can be totally weird and actually keep track of how much money is in your account.

      1. You can try. Wait until you get hit with an “inactivity” fee and it reduces your balance to below the required amount for free checking. And then you get hit with a “service” charge because you have less than the minimum required balance. And all this shit happens long before you get your monthly statement and find out about it.

        1. Uhhh….try? Hey genius, it’s NOT that hard. Lets see……if the account minimum is 1,000 then I keep…..1,000 in the account. Wow, Tough math.

          Then again, the typical knucklehead out there is functionally innumerate. Heck, one of those even magaged to get elected President.

          1. Someone is having reading comprehension problems and/or has sand in his vagina:
            “until you get hit with an ‘inactivity’ fee and it reduces your balance to below the required amount for free checking”

        2. With most banks offering 24/7 online access to account information, it’s reckless to rely on monthly statements to ascertain the status of accounts.

          I balance my checkbook at least once a week, if not more frequently, just by comparing my own records (which I maintain via my checkbook register and a relatively simple Excel spreadsheet) to the online data.

          In this day and age, there’s just no good reason not to notice an unexpected fee or charge almost immediately after it occurs.

          People have to put in a little extra effort to pay attention to what’s going on. It’s not hard, really.

    2. Actually, customers have always been able to opt out of overdraft protection. According to the new Reg E rules, customers have to Opt In to continue receiving overdraft protection. So when you write that bad check now, instead of the bank covering it and charging you a fee, the bank will return it, and the retailer will charge you a returned check fee, often much more than the bank was going to charge. Plus you now have a black mark on your record that counts against you next time you try to open an account and the bank runs a check on your history.

  20. Time it will take certain Congressional committee chairs to parade in front of the cameras to state that they will be calling the CEOs of the major retail banks to committee hearings on the Hill to explain why they are once again stealing money from the pockets of hard-working Americans . . . . .

    With an egg-timer.

    llater,

    llamas

  21. On a more-serious note – maybe you hadn’t considered the fact that writing a check which you do not have the funds to cover is a felony in most states – uttering and publishing. Where I live, it’s 3-5.

    The fact that you made a mistake doesn’t change that.

    While it’s true that it’s a felony that seldom charged (adequately) unless the sums are large, the fees the bank charges you to cover such felonies should be better considered as prosecution insurance. It’s pretty cheap at that.

    If you don’t like the banks charges for carrying your overdraft, you’re not going to like the charges the merchants apply to you for NSF checks at all. And if you don’t pay them, they can turn you over to the DA – who you DO have to pay.

    llater,

    llamas

  22. Banks did this to themselves, for example processing checks from largest to smallest, etc.

  23. Most community banks do not offer “free” checking at all, as the typical customer who seeks a free account are the least profitable customers. They are the ones usually looking for a good check cashing service, and that’s about it.

    A typical community bank in the $120 to $150 million range makes mid six figures on NSF fees and another $150,000 to $200,000 per year in checking account fees. This is a substantial portion of their total income, and will be a huge blow when this income goes away.

    The thing I see most people complaining about is that a bank is a business which operates on a for profit basis. They provide a service, such as covering your overdraft, and receive a fee in return for that service. If you don’t want to pay the fees, maybe it’s time to start completing all of your transactions in cash.

  24. The fact that you made a mistake doesn’t change that.

    What, there’s no mens rea requirment in your state?

    1. Sure, there is.

      Now follow me closely.

      You write a NSF check.

      In scenario 1 – the bank covers it for you, charge you a spanking fee for the privilege, but you are off the hook for ‘uttering and publishing’.

      In scenario 2 – the bank returns your check to the merchant, NSF. The merchant has no way to contact you. Or you’re out of torn, and don’t return his calls. What’s a man to do? So he calls the prosecutor, goes down, swears out the necessary complaint, and large men in blue suits show up with a warrant – for ‘uttering and publishing’.

      Your intent, to this point, is immaterial.

      By the time you get to demonstrate your lack of criminal intent – by offering to make the check good, plus the merchant’s returned-check fee – you have already spent bowcoo time and bucks getting dragged into the legal system. You may have an arrest record. And if you can’t make the check good – for whatever reason – the prosec utor may well take that as prima facie evidence of your criminal intent, and off to trial we go.

      I always love the legal eagles who bring up mes rea and culpable intent – all very true, but these matters are only decided at or on the way to trial. By the time you get there, the vast majority of the damage to you has already been done – and cannot be undone. Making the check good is actually probably the least of your problems at that point. Your lack of criminal intent will not prevent you from being arrested and charged with a felony.

      The bank’s overdraft charge is a pretty small price to pay to avoid that, it seems to me.

      llater,

      llamas

      1. This is not accurate for the states in which I’ve practiced criminal law.

        First, a ‘worthless check’ charge is a misdemeanor not a felony. Forging and Uttering is a felony (which would be fraudulently passing an instrument known to be a falsehood, such as attempting to pass a check on a fake account.)

        Second, a Worthless Check charge does require knowledge that there are insufficient funds to clear the check. A random bounced check is not enough to get police to make an arrest. Every case I’ve seen involved a pattern of worthless checks, such as at least 10, and intent is almost always clear; or it involves not making good a check thats bounced.

        Third, being a low-level misdemeanor, it won’t get you thrown into jail on its own. Its a citable offense. In this county, arresting someone for this will result in a magistrate yelling at the LEO about how much it costs the county to house an inmate in jail for a night.

        Fourth, these types of cases are absolutely hated by prosecutors. Why? Because a lot of business try to use these charges as a free collection service, and it pisses of the prosecutors when they have to spend an afternoon a week playing debt collector. Absent some serious misconduct, the typical result is a plea to a minimum fine plus court costs and restitution.

        So no, the banks aren’t ‘saving’ anybody from criminal prosecutions by ‘offering’ overdraft protection. Its a clear attempt to increase fee collections. Thats all it is.

        *****
        My problem with the bank overdraft charges, and particularly debit card transactions permitted to go through even when the account balance is insufficient, is not that its done. Its that it used to not be done, and then the banks each decided to change how that works. One used to be denied the transaction if funds were insufficient. People came to expect that to be how it worked. Then the rules were changed, and many got caught off guard. “Whoa, I thought my account was low, guess I’ve still got a little in there.” And then they get a statement a couple weeks later showing that, no, theres not a little in there; in fact theres several hundred dollars missing, as the $100 worth of coffees, cigarettes, and gas now costs you $500.

        Its the set-up that pisses me off here. They got the customers used to getting denied when the account hit zero. And then they changed it so that you can go several hundred dollars in the hole, and they will charge $30-$40 for each transaction, even if it was just for a $5 pack of smokes.

  25. Free checking was a way to attract deposits. Back when the deposits could be loaned to other customers rather quickly.
    Banks are now trying to get reduce deposits – they are liabilities to the bank and the pool of credit-worthy borrowers is shrinking fast so they can’t loan this borrowed money quickly or very profitably anymore.

    If you were a bank, how would you get rid of unwanted deposits?

  26. Well, they could give them to me.

  27. If you were a bank, how would you get rid of unwanted deposits?

    Hookers and blow?

  28. “Back to the mattress”? I don’t think I understand what this phrase means in this context.

  29. HEADLINE, HEADLINE!!!

    Government Bans Securing of Loans with Pound of Flesh, First Born Children, Broken Kneecaps

    …experts agree: interest rates for borrowers are sure to rise.

  30. fuck. isn’t that swell. i can’t even get a decent rate on my savings account and now i’ll probably pay a “maintenance” fee of five dollars. times like these you have to say god bless the usa

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