In a recent New York Times “Room for Debate” column, Wade Henderson, president and C.E.O. of The Leadership Conference on Civil and Human Rights, and Michael Calhoun, president of the Center for Responsible Lending, discuss the need to crack down on abusive debit card fees banks are charging to consumers.
While the 2009 Credit Card reform act “prohibited tricks and traps like exorbitant late fees, deceptive payment allocations and arbitrary interest-rate hikes on existing balances,” Henderson and Calhoun write that:
Debit card markets, by contrast, remain unfair and dysfunctional. Take overdraft fees: many banks charge $35 for each small debit card purchase that exceeds an account balance. Some banks even reorder consumer transactions when processing charges, paying large purchases first to artificially increase the number of overdraft charges. A few major banks even add payday loans to accounts, with 350 percent interest rates.
These fees go far beyond covering the cost of providing checking accounts and debit cards, and inflate earnings. One banker declared overdraft fees so lucrative that “If I had two more products like …. [this], I could quit making loans altogether.” These fees pull billions of dollars annually from consumers’ pockets; one overdraft a month would add up to $420 a year in fees.
In response to these practices, Henderson and Calhoun say one step is to ensure that the new Consumer Financial Protection Bureau is allowed to do its job, and that means urging the U.S. Senate to overcome obstructionists to approve the nomination of a director to lead the bureau.