NewsBlaze

NJ Citizen Action Calls For A Stop To Excessive Overdraft Fees

NewsBlaze — Thursday, October 8, 2009

Bank overdraft fees cost New Jersey approximately $499.8 million over the past year, according to a new report by Americans for Financial Reform. Nationally, last year banks made $38.5 billion from overdraft fees. "That number is likely to increase without new, clear rules of the road for banks and their customers and a real consumer watchdog in Washington to enforce them", said Phyllis Salowe-Kaye executive director of New Jersey Citizen Action working with the Americans for Financial Reform coalition.

Overdraft fees are generated by so-called "courtesy" loans banks force on their customers whether they want them or not by covering ATM withdrawals or purchases for more than is available in the account. A recent report by the Center for Responsible lending found that 81 percent of overdraft fees assessed in 2008 went to cover bonuses for executives at the nation's four largest banks.

"There is nothing courteous whatsoever about millions of dollars being skimmed off the bank accounts of hard-working people," Salowe-Kaye said. "This is real money — money that if spent here at home could really boost our economy. Instead, it is being sent to people who aren't going to turn around and put it back into the economy because they need it to buy groceries. These sleazy practices are a classic example of regulatory failure and the need for a real watchdog who is looking out for our wallets, not the banks' bottom lines."

As banks continue to move away from their core functions, overdraft fees have become a vital part of their bottom lines, the report found. Today 44.5 percent of all banks and credit unions have overdraft income greater than net income. The result of this business model is that banks are steadily upping fees while reducing disclosure, the report found.

Surveys repeatedly have found that consumers want to know when they are about to go over available funds so that they have the option of cancelling the transaction before fees are assessed. In spite of this, the banks' reliance on such fees to generate income, have all but eliminated the practice of telling customers when they are overdrawn before the transaction is complete.

Just recently several banks have voluntarily cut back and will change the way they charge overdraft fees.

However, according to a Center for Responsible Lending Report released yesterday, American households spend more on overdraft fees than they do on fresh vegetables.

New Jersey Citizen Action is the state's largest citizen watchdog coalition working to protect and expand the rights of individuals and families and ensure that government officials respond to the needs of people rather than the interests of those with money and power. A member of Americans for Financial Reform, a coalition more than 200 national, state and local consumer, employee, investor, community and civil rights organizations that have come together to spearhead a campaign for real reform in our banking and financial system.

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