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Reining in the Banks

by: catchlightning

Wed Sep 23, 2009 at 18:42:11 PM EDT

cross-posted from Working America's Main Street blog

When Senator Chris Dodd (D-CT) decided recently to remain chairman of the Senate Banking Committee you could hear the financial industry lobbyists let out a collective groan.

It was Dodd who earlier this year championed credit card reform in Congress, helping to pass a bill, then signed by President Obama, to end the abusive and deceptive practices of the credit card companies.

Now Senator Dodd is gearing up to take on the banks on several fronts including overdraft fees, consumer financial protection and regulatory reform.

catchlightning :: Reining in the Banks

The Washington Post reported Monday that Sen. Dodd plans to introduce legislation to rein in bank overdraft fees.

A backlash is brewing on Capitol Hill against banks that charge large fees for overdrafts without asking or telling customers, the latest sign that the financial crisis is shifting the balance of power from banks toward borrowers.

Sen. Christopher J. Dodd (D-Conn.) plans to introduce legislation requiring banks to get permission from customers, rather than allowing overdrafts automatically. If customers decline and then try to overspend, the transaction would be rejected. A similar bill is pending in the House.

With the rapid expansion of bank debit card use in recent years, banks have found it highly profitable to automatically allow most debit transactions to process regardless of whether sufficient funds are available in the account, then charge the customer anywhere from $10 to upwards of $30 per overdraft.

In an announcement Dodd added:

Some banks maximize penalties by processing the largest purchases a customer makes first, draining accounts faster and creating the potential for multiple fees on multiple smaller purchases. Even on point of sale transactions, such as debit card or ATM transactions, banks do not notify the customer when they are withdrawing against insufficient funds. As a result, customers can unknowingly be charged hundreds of dollars in fees for only overdrawing their account on a few small purchases.

As evidence that the tide is beginning to turn against the unfettered power of the banks, even before Sen. Dodd's legislation is introduced, major banks are scurrying to try to cover themselves.

Yesterday The New York Times reported

Bank of America and JPMorgan Chase, two of the nation's biggest banks, announced plans on Tuesday to drastically overhaul their debit card programs by lowering or eliminating fees, changing the way they credit transactions and allowing customers to opt out of overdraft protection.

As part of a broader effort to reform America's financial regulatory system and make it more effective, Dodd is also busy reviving his push for a new Consumer Financial Protection Agency. And the big business lobby doesn't like it one bit.

The Chamber of Commerce, the business community's umbrella group in Washington, recently organized a conference call coordinating some 200 representatives of groups who oppose the legislation. The call doesn't mention any of the serious problems that led to the financial crisis or why consumer regulation is important. Instead, it follows a "death panel" approach to political discussion: Scare the hell out of everyone.

Dodd has been slamming industry opponents of the plan for months. At a Senate committee hearing earlier this session, referring to a story in the Washington Post, Dodd said:

"When I pick up the morning newspaper and I read the first headline that 'Fault Lines Emerge and Industry Groups Blast Plan to Create Consumer Agency,' what planet are you living on? The very people who created the damn mess are the ones now arguing that consumers ought not to be protected. They're the people who paid this price. And the idea that you're going to first attack the very clients and customers who depend on you every day is not the place to begin."

Next Dodd sets his sights on more comprehensive, sweeping regulatory reform.

We can be sure the big boys on Wall Street won't like that either. Stay tuned.

Tags: Dodd, banks, Financial Regulation, (All Tags)

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Reining in the Banks | 3 comments

tips for Dodd remaining chairman on Senate Banking Committee (4.00 / 1)

by: catchlightning @ Wed Sep 23, 2009 at 22:43:28 PM UTC

A Big part of the Problem (0.00 / 0)

will be the Media portrayal of this fight.Todays "liberal Media" is a major impedimemt to getting the Public Option in the Health care bill and will be with getting a decent consumer agency too.

It will be Dodd on one side and Lobbyist with millions on the other pumping out Press releases to the Lazyest group of people in the country (Journalists) who will take the press releases,copy and paste them in their entirety,Get one quote from Dodd or some staffer,type it up and be done for the day by 11am.

by: ctkeith @ Thu Sep 24, 2009 at 00:09:49 AM UTC

Read This Very Informative (0.00 / 1)

This is some additional on topic notes high lights the problem I collected this article from www.MilfordDailyblog.com

The financial world today has changed greatly over the years, with seven day banking and faster than ever clearing times of transactions our finances have moved into the realm of light speed.
Big banks and their banking policies have also changed greatly with the changing times. After the Real Estate bubble popped, big banks became victims of their own greed. Staggering foreclosures and evaporating collateral in real estate forced hundreds of small and large banks to go out of business.
However, some select banks were deemed "too big to fail" and reckless and greedy banking institutions like AIG, Citibank, Fannie Mae, Freddy Mac, Bank of America, etc.. etc.. were given Trillions of dollars in taxpayer bailout money.
This money was created by the Federal Reserve System, a corrupt institution run by the banking elite themselves and led by Ben Bernake. While many have recently congratulated Ben Bernake for fending off a Depression globally, Americans have seen no relief, no growth, and ever increasing unemployment.
The Trillions in fake money that has been given to so many un-named institutions are still a mystery to the average American but fortunately our leaders have taken notice and two bills H.R 1207 and SB 604 are demanding an audit of the Federal Reserve. The Federal Reserve has fought back by hiring a high priced PR firm to lobby Congress and make sure the recipients of the Trillions in tax dollars are kept secret.
According to Peter Schiff of Euro Pacific Capital, every one of us will be paying the price even harder in the coming years. "When the fake money hits the streets Congress will be confronted with two horrible choices. Raise interest rates to stop runaway inflation and further collapse the real estate market and stock market or leave interest rates low and force the Dollar down against other currencies. This second choice also brings the risk of forcing our debtors to cut their losses, to induce the sale of U.S. treasuries and debt and spawn hyper inflation, or worse hyper stagflation."
"The stage we are at now with banks is one where banks are trying to make it through the challenging environment in the next two years, and they are doing a great job of making huge profits off all the economically challenged people who live on minimal fixed incomes. This practice is one the banking industry refers to as their "Fee Income" and their "Fee Income" is expected to produce a whopping 38.5 Billion in revenue for the big banks. This figure is so large that it will now be the single largest revenue source for all banks."
One bank in particular has a $39.00 fee; legally they can charge their customers a maximum of ten such fees in a day for a total of $390.00 to a single consumer. Other banks have fees for deposited but uncleared checks (UAF) or their credit cards have Over Limit Fees and Late Fees. There is also the ATM fee game where it is now possible to pay multiple fees on a single cash withdrawal. Adding insult to injury banks are charging up to 39% interest on these late fees. Mortgage companies have also got into the fee churning game. Many mortgage companies using (ACH) or the electronic payment system are running multiple transactions through to the banks that draw on payment accounts.
Anyone who has had experience with this will see that there are two separate transactions posted to their checking account. One transaction is for a $5-$10 "A Convenience Fee" and the other the larger mortgage payment. While banks could easily combine both these transactions into one payment they refuse. Instead they learned that this practice will generate twice the $39.00 fees for their banking partners who will overdraw the account by clearing the larger check first and the smaller check next.
At Peoples bank here in Milford, CT bank managers are under duress by their higher bosses not to refund any overdraft fees. They are training their employees to engage an angry public and give answers and solutions that guarantee they keep these very profitable fees. The manager also said that managers will deduct the refunds from their bottom line and punish employees who engage in Overdraft refunds.
The bank manager I spoke with wishes to remain anonymous, but has personally told me that these fees are being paid by the towns financially strapped, the poor who live paycheck to paycheck. Sadly their cowardly bosses who never see a bank customer are instructed to tell fee victims to fill out an overdraft protection loan form. However, she said this is a waste of time because management has made it nearly impossible to qualify for this type of loan. It is not in the banks financial interest to be giving away their fee income to people who wish to opt out.
Congress and the CT Banking Commissioner have heard so many complaints about this fee issue, that there has been talk of reforming the practice under an ethics rule. Some suggestions have been made to limit banks to charging one fee per day, other suggestions have been to force banks to lend the overdrawn money or not issue the fee, and other proposals have been to limit fees to reasonable amounts.
For obvious reasons the banking industry is fighting this at the highest levels and lobbying hard to keep "extorting the poor." Banks argue that in these troubled times they "need the money" more than the people they take it from. They argue that banks can't fail but individuals who can't manage their finances can and should.
While banks know that there is little money to be made in this era of low interest rates their core business have been criminally "retooled" to strip the general public "one fee at a time." This money comes from people "young and old" living on the "edge."
The best way to fight these fees for now is to use low fee Credit Unions like McKesson and get rid of your high interest credit cards, or just pay them off altogether.