Thoughts, opinions and
comments by attorneys and staff at
Whitfield Bryson & Mason

Too Big to Fail, Too Rich to Care

The last decade has been a great time to be a bank. In fact, while most of us can only dream of being so lucky, few among us would likely have the stomach to be so unconscionable. Imagine, if you will, having year after year of record breaking profits, then, when you run into trouble caused solely by your own greed and catastrophic business decisions, someone steps in with a check for $700 billion to save you. Imagine further, that after you have been brought back from the brink and resume raking in those massive dividends, instead of freeing up that capital and making low interest loans to very people who saved you, loans for things like homes and business start-ups, you sit on the money, hold onto enormous stockpiles of cash, and pay your executives and stockholders enough money to buy things like planes, islands and possibly the naming rights to entire galaxies.

I think talking about bank overdrafts within the greater context of the general disposition of banks is important because it shows the banks have yet to learn a lesson. You would think that after seeing their image destroyed over the past few years, banks would be doing everything they could to rebuild their image – lowering their fees, opening up lending markets, offering higher rates of return, etc. What you wouldn’t expect, at least for the non-cynical among us, is yet another swindle by the nation’s financial institutions, but, unfortunately, fraudulent and excessive overdrafts have become the next black eye for our nation’s banks, though I fear not the last.

If you read our news story of a few weeks back, heard about the settlements on the local news, or have first hand experience with the shocking way in which banks assess overdraft fees to their customers, chances are you know a thing or two about overdrafts. For those of you where I was before I jumped head first into this issue, I am here to let you know that yes, there is something very fishy about the way in which we are charged fees by our banks. From re-ordering deposits and withdrawals, to withdrawing funds sometimes days before crediting deposits, to even the hiring by banks of outside consulting forms whose only task is to increase revenue for the banks through the assessment of overdraft fees to their customers. The short of it is, all this time you thought something wasn’t right about the way your bank charged you overdraft fees, well, you were right.

When you look at the banking practice of charging huge overdraft fees (somewhere around $30 billion per year by most estimates) from multiple angles, their actions just become more and more egregious.

Case in point: Banks aggressively try to sign customers up for overdraft protection using scare tactics.

While the Federal Reserve now requires banks to obtain permission before enrolling their customers in automatic approval of debit card and ATM transactions, i.e. overdraft protection, the Federal Reserve rule is inadequate. According to the Center for Responsible Lending:

The rule does not address clear abuses that customers experience once they have opted in, including the exorbitant cost of debit card overdraft coverage re-ordering transactions, an egregious practice that has come up in recent lawsuits. Many banks are using aggressive and misleading marketing to persuade their customers to opt in to high-cost systems that most Americans report they would not want.

So what can you do? Fight back. Abuses of the little guy by those who seemingly have all the power is a story as old as civilization itself. And while these banks may look at settling lawsuits as a cost of doing business (Bank of America to the tune of $410 million, JP Morgan Chase $110 million), such lawsuits send a powerful message that they will be held accountable and that there is strength in numbers.

Now is the time to hold every single bank that has preyed on their customers accountable.

Now is the time to fight back.