Bank Overdraft Fees

Again, here is a subject we should be taking care of ourselves instead of expecting the government to fix.  This article tells about an inquiry, not an investigation to uncover wrongdoing, by the Consumer Financial Protection Bureau into banking practices regarding overdraft fees. 

I made the point back in July 2011 and again recently that the bankers are smarter than the government when it comes to business and finance.  They react to new regulations with new policies or fees, forcing the government to come back later with more regulations.  It’s a vicious cycle that adds no value to our lives or to the economy.  In fact it often results only in our receiving another piece of mail with a multipage explanation of how the rules have changed - once again.

The fact is that most of these interventions for consumer protection involve situations that are directly under our control.  If we act responsibly, we don’t need protection.  This case of overdraft fees is a prime example.  The fees become an issue only when someone writes a check or withdraws from an ATM more than is in the account.  It’s addition and subtraction, but it doesn’t affect people because they can’t add or subtract.  It affects them because they don’t keep their records current.

There are many excuses for slipping, but they are only excuses.  When customers make an error, the banks take advantage.  When this happens, there should be one of only two outcomes.  Either the fees are high enough to cause a person to change behavior and keep better track, or they are not.  A good analogy is running out of gas.  You are stuck by the side of the road, costing you both time and money.  It is the result of not paying attention to the fuel gauge. There is no question as to whose fault it is, and it is easily remedied in the future.  This seldom happens to people a second or third time because they have learned from the experience to pay closer attention to the gauge.

Likewise overdraft fees should be no big deal!  Yet the head of the bureau wonders: “how consumers are affected and how well they are able to anticipate and avoid paying late fees.”  What a surprising statement!  They are affected by having to pay fees that should cause them to change behavior, and they know exactly what behavior needs to change.  To assume that people are incapable of solving this problem on their own seems arrogant and insulting.  Citizens displaying responsible behavior, not government inquiries, effectively solves this problem with no more regulations or "protection" required.