I'm not much of a blogger, and, as you'll see below the jump, I'm a bit swamped for time right now trying to dig myself out of a stupid and frustratingly large personal banking crisis. But since I figure that I'm not alone these days in getting hit by salt-in-the-wound bank overdraft fees, and since I haven't seen anyone leading the charge to push Congress to institute personal banking regulations that aren't entirely pro-corporate, anti-consumer, I'd thought I'd come out of the closet a bit about my shoddy finances and cc you all on a letter I just sent to one of my senators.
Most other graduate students I know are hit at least once a year by the same sort of crisis. It would be nice, I think, if people here were to please help to push the federal government to help to insist on a bit of sanity about overdraft penalties.
Let's jump together.
Dear Senator Akaka,
I am writing to ask you to please draft or to help to pass legislation that will help to return some sense and compassion to federal regulations regarding bank overdraft penalties. As they are currently set up, regulations place all the moral responsibility for overdraft penalties on families, many of whom are struggling to stay financially afloat. In a time of stagnant salaries and continually higher prices, a lack of bank overdraft penalty regulations only makes the US economy less competitive. For example, it is only helping to deepen the current housing foreclosure and consumer credit crises.
Current federal regulations provide working families with no safety net or protection from excessive and predatory bank overdraft penalties. Here's a link to the US Department of Treasury's FAQ page on "Overdraft Fees and Protection": http://www.helpwithmybank.gov/... There, they tell me to shop around for accounts with lower penalties, to purchase overdraft protection with my non-existent money, and to not write checks, e.g., for rent, food, and gas, that I may not be able to cover. But I'm looking for a government, not a mother.
Current overdraft penalty regulations allow national banks to deliberately profit off of working class family financial mistakes, and to drive them disproportionately further in financial distress. For the sake of US economic competitiveness, and to support working class families in Hawaii and across the US, please draft or support legislation to return some sense and compassion to bank overdraft profiteering.
Here's an example from my own life of how the current lack of regulation encourages banks to pad their profits while amplifying small consumer banking mistakes into full-blown personal financial crises.
I'm a 36 year old PhD student and live, like most others, barely pay check to pay check. Over the past few weeks, I didn't keep adequate track of a $300 check that I issued a month ago. Last Thursday, the recipient cashed the check. I will get paid on Tuesday, and on Thursday, my checking account fell below the level that I thought it was at. Instead of having about $300 dollars in my account, I had about zero. Sure, my mistake.
Over the next three days, before I received the overdraft notice in Saturday's mail, I used my debit card 5 times for a total of 6 charges as follows:
Thursday: $11, $41 (3 gallons gas, $40 atm withdrawal plus $1 service fee),
Friday: $7, $56 (lunch in Kahala Mall, and groceries from CostCo)
Saturday: $5 (stupid impulse online music purchase)
I'm not saying that I'm a model of consumer accounting. I'm a teacher after all, not an accountant. Regardless, here's how the Bank of Hawaii handled my mistake:
Thursday:
$25 overdraft penalty on top of $11 gas, $25 overdraft penalty on top of a $40 ATM withdrawal, and $25 overdraft penalty on top of a $1 bank service charge. In other words, a $75 fee to extend $51 credit to me for 5 days.
Friday: $25 overdraft penalty on top of $7 lunch; $25 overdraft penalty on top of $56 groceries. In other words, a $50 fee to extend $63 credit to me for 4 days.
Saturday: $25 overdraft penalty on top of $5 stupid purchase. In other words, $25 to extend $5 credit for 3 days.
In sum, the Bank of Hawaii has charged me $150, or 118% interest to extend me $127 credit for 5 days or less. The current 1-month LIBOR rate for short-term borrowing is 2.45%.
Should this be legal? And will you please do something to help?
All best wishes,
Amy