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- cross-posted to:
- [email protected]
“Banks call it a service,” the president said. “I call it exploitation.”
The Biden administration unveiled a new rule Wednesday aimed at slashing bank overdraft fees to as low as $3, a move the president said would help end abusive practices by financial institutions.
Under the proposal, banks could continue to charge fees when a customer’s account falls below zero, but either at a price in line with the bank’s actual costs to administer the overdraft or at an established benchmark created by the new rule.
The Consumer Financial Protection Bureau (CFPB) proposed potential fees of $3, $6, $7 or $14 and is seeking feedback from banks and the public on what would be appropriate. Current overdraft fees often push $30 or more, taking a significant bite out of low-income accounts.
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Biden: Wants to do something good for a lot of people
GOP: “Thats communism and evil and unamerican and unchristian and racist and the West is falling! Quick, do something before he helps the poor!”
Democrats: “This one thing doesn’t go far enough at all! There is no way in good conscience I can support this man!”
It doesn’t go far enough. Over draft fees happen on a checking account. Banks know exactly how much is available.
Certain banks are also notorious for charging overdraft fees when there was literally no overdraft.
Certain banks are also notorious for charging overdraft fees when there was literally no overdraft.
There’s an explanation for at least one way they do that. Certain transactions end up being “pre-authorized” for a larger amount before they settle. Gas stations are a common place for this: you swipe the card when you first get to the pump, then you pump, and then you pay the bill based on how much you pump. When the card is swiped, a “hold” gets put on your account for a large amount, perhaps $150, and then the charge goes through for the actual amount you paid.
When you pay by credit card, this hold goes against your available credit, and since most people are nowhere near their limit this ends up not being that big a deal. However, when you pay by debit this hold “freezes” actual cash in your bank account, which then can’t be used for anything else and can cause you to overdraft while there is still money in your account. Tnis “freeze” may not actually be listed on your account anywhere. What’s even worse is that the hold can last for days, and you may not even realize it.
Allow an overdraft fee to exist, and banks will find ways to make them happen. Period. There’s no need for paragraphs of explanation for a concept so brutally simple, that furthermore has been proven.
Hell, obama addressed their predatory practices in the consumer protection act (iirc the acts name).
Twitter users: I have no idea how government works but Biden didnt do everything i wanted so im not voting
Voter: “I don’t see how Biden’s any different”
Biden: Wants to do something good for a lot of people
It’s a bandaid on a massive headwound…
Then sending you home while still concussed and bleeding everywhere.
Sure the band aid is better than nothing, but if people are having multiple overdrafts a month, then their real problem isn’t how much an overdraft fee is.
Say someone has 4 a month, that’s a lot, and I doubt many get that consistently.
Going from $33 to $3 saves 120/month.
It’s not nothing, but that person is still negative on their bank account. Probably carrying a shit ton of credit card debt. Speaking of, doing something about interest on predatory lending (including credit cards) would be much more effective, but hurt the rich and banks even more
The main issue is a lot of people do to have enough to live.
This is a huge fucking problem and this will be a huge help. Don’t let the perfect be the enemy of the good.
Households frequently incurring overdraft and NSF fees are more likely to struggle to meet their financial obligations: Among households that frequently incurred overdraft/NSF fees, 81% reported difficulty paying a bill at least once in the past year. This drops to 25% for households that were not charged a fee.
Low-income households are hit the hardest Overdraft and NSF fees: While just 10% of households with over $175,000 in income were charged an overdraft or an NSF fee in the previous year, the share is three times higher (34%) among households making less than $65,000.
Helping poor people is always a good thing.
Ok but the other guys are the ones bashing my head in so
And someone who won’t is better.
I’m not denying that.
But why would you pick someone to help you with zero medical knowledge just because he wont keep bashing?
Why wouldn’t you want a doctor or even just a school nurse instead?
No, don’t take input from banks. That’s stupid. That is who you’re regulating. You don’t ask the wolves how to best protect the sheep
its better to do that otherwise you get banks suing and the supreme court siding with the banks
It’s unfair that a bank can make 3 dollars off me for not having 3 dollars to pay. I have to have thousands of dollars in the bank to make 3 dollars. So I think the overdraft should be the exact amount over drafted plus the interest per the amount overdrafted. That’s fair.
It’s not fair because of the risk of total loss. You giving money to the bank earning interest, there’s no risk the bank is just going to stop responding to you and keep your money. There’s a chance someone who owes the bank money is just gonna stop going to that bank and they’ll have to write off the full amount as a loss.
But, I believe this is essentially what they do in Canada. It’s two different rates, because a negative balance is essentially taking out a non-collateralized loan. But you don’t have to ask extra permission on small amounts, you just owe the interest.
do away with "account maintenance fees"for not having a big enough balance too
(also things like these are why i don’t take the people who say biden is a conservative or he doesn’t do anything seriously)
All poor people taxes while we’re at it. Inertia is fucked up.
Thank you!
The Consumer Financial Protection Bureau (CFPB) proposed potential fees of $3, $6, $7 or $14 and is seeking feedback from banks and the public on what would be appropriate.
And they will listen to banks and not the public.
Wait so Biden introduces a plan to at LEAST halve overdraft fees and we’re whining before anything even happens? Is it not reasonable to at least take input from the industry you’re regulating? Don’t you want to know how they will respond and what impact they foresee, biased or not?
Wait so Biden introduces a plan to at LEAST halve overdraft fees and we’re whining before anything even happens?
Until it happens, it’s the same as BBB, the minimum wage increase, and the public option. Something Democrats say they want to do. Now they just need an excuse to not do it.
The main obstruction to min wage increases and public healthcare is certainly not Dems, right? Who fucked up Obamacare? Who’s repealing child labor laws? What party controls states with min wages at the federal minimum? I agree we shouldn’t count our chickens before they hatch, but one party is supplying the eggs here and the other is stomping on them gleefully…
If they only listened to the banks they wouldn’t propose the rule at all.
banks are the ones implementing them and they don’t have to listen to the cdpb, thanks to the supreme court, so it’s best to work with them
If they don’t have to listen to it, it’s not a rule.
I’ll take your cynicism a step further.
The bureau with consumer protection in its name didn’t even come up with a zero number. It’s not even in the cards. From the protection bureau… Fuck me
because a) republicans deeply oppose it and b) republicans already gutted the powers that the cfpb has under trump
Like 99/100 times the answer to “why haven’t Democrats done more” is “GOP fuckery”.
Isn’t it already the case that you can just set it so overdrafts won’t work and if you try to spend money you don’t have it just rejects? I’d rather have the rule be that by default with an opt-in for overdrafts that cost money.
Just seems weird to set hard dollar numbers in a rule, they’re going to get outdated and not worth it to the banks so they’ll just turn it off themselves, I’d rather have the option.
I have no issue with overdraft fees, which are normal (for credit accounts), but my problem is that to my understanding most cards in the US are credit cards (so overdraft-capable) by default. Rest of the world takes advantage of the more sane debit card.
Normal in the U.S… When I was an expat in Austria, my bank didn’t charge anything for a negative account balance.
You either have a very different debit card system than the US, or a very different definition of the word sane. I assure you that in the US, debit cards are (generally) not the better option.
In fact, I can confirm it - you have it completely wrong. It is only debit cards that can have an overdraft. Credit cards are when you have an ongoing, semi-permanent line of credit available to you. Let’s say this limit is $1,000. Each time you use it, the credit card issuer pays the merchant. If you attempt a purchase beyond that line of credit, you may (and often are) denied the purchase. If it does go through, you will have to pay an over-limit fee. The credit issuer then sends an itemized invoice, typically at the same time each month, and you must repay them. If you don’t repay them in full by the deadline, you must pay interest. The main takeaway is that credit cards are always someone else’s money at the time of purchase.
Debit cards are typically linked to your personal checking account. They work differently on the backend, but are usually similar at the point of sale. Checks, which link to the same account on the backend, often bypass validation of funds. Your bank processes the transaction on your behalf, but (again, typically) has not granted you any line of credit. If you get a transaction through where you don’t have the funds, the bank is then forced by their agreements with the payment processor to extend you a line of credit. But the main takeaway is that debit cards are your own money, in your account, at the time of purchase.
It’s a common (but dangerous) trick when you’re low on funds to use credit cards to “float” an expense. Debit means you must have the funds presently available in your account, which often means they must have been deposited a few days ago. Credit means you have until your next statement to arrange them, which likely includes at least 1 payday.
“to my understanding most cards in the US are credit cards”
This statement confuses me a bit, but I guess that adds to the misunderstanding? Debit and credit cards are tied to different types of accounts. Which you’re using depends on if you have the money and want it immediately removed from your checking account, or if you want to “borrow” and pay the total once a month.
When I helped my sons open their first checking accounts and got their debit cards, we had to “opt in” to not allow overdrafts and to have purchases cancelled, but that option would expire once they hit a certain age and would have to select it again. The backup to that is if you have a savings account, the accounts can be linked so that if you were to overdraft, the extra would be taken from savings to prevent overdraft fees.
These are all great things, assuming you have money in the first place. If you believe Americans are using credit cards more often than debit, it’s probably 1) because CC companies incentivize us to do so, or 2) people just generally don’t have the money to meet their needs in the first place, so juggle and borrow funds as they try to keep their heads above water.
- because CC companies incentivize us to do so
That was my point, yes. Also, see my other comment, I live in Europe where credit lines (we do have the so-called “shopping” cards offering fixed installments for purchases but also overdraft at an ATM) aren’t the norm here and people opening up such an account take it more seriously and pay attention not to overdraft. “Building your credit score” isn’t a thing here. Confusing terms and scum agents promoting those cards do trick people into overdrafting and paying huge monthly interests (30% / year) instead of fixed installments, though.
Actual poor people can’t get credit cards, then a few dollars of overdraft puts them deep in the negative. Guess how many hours a minimum wage earning american has to work to overcome a SINGLE overdraft fee…
At 2.13 an hour, it’s measured in days.
See, your assertion rings as false for me, because as an American I’ve definitely run into things with my debit card where the problem was that the transaction was being treated as a check in the background, which meant it takes up to 3 business days to get through the check clearinghouse (even if you paid with your debit card and not a physical check), and during that period, that pending transaction doesn’t even appear on your online statement. (In modern days, Venmo is bad about this, but in the past it was random places that could do it to you.) So if you didn’t keep the mental tally of transactions and didn’t have much money, it was very easy to forget an invisible pending thing and accidentally overdraft.
And, obviously, credit cards don’t do the check clearinghouse thing, that’s a debit card thing.
Given the things fucking up the gears is the check-style old-timey clearinghouse shit going on in the background, I fail to see how making the card/transaction even MORE “debit-y” would fix it.
So you, or me, or perhaps both of us, don’t understand some significant differences in how your country processes debit transactions behind the scenes compared to mine.
Maybe you should elaborate how debit works in your country?
I guess it does work differently, and it depends on the bank. I’m in Europe. When I make a payment, let’s say Saturday, that will actually be processed on Monday, the sum doesn’t show up in my account anymore and I see it as a pending transaction. So I can’t spend more than I have on a debit account.
The only time I would owe the bank are card reissue fees every few years, which could take the balance into the negative. But if you have multiple accounts with the same bank (including savings accounts) the fee is automatically withdrawn from other accounts. Also, no fees for the negative balance if it’s a debit card. You can have it pending for months without issue.
I actually take advantage of not being able to overdraft by having a separate account and attached card that I only use for online payments. It normally stays on 0, and I only move money there before making an online purchase. If my card details are leaked / stolen, transactions would get refused (no money in the account), I would just close the card and request another one.
PS Given the downvotes, I understand I might have a wrong understanding and might confuse banking terms a bit, but I don’t live in the US and I certainly wasn’t taking the side of banks regarding the overdraft fees.
