One of the major criticisms of payday loans are that their rates are too high. Well, now Congress is looking at banks and their overdraft fees with the same eye.
Banks call the the “service” overdraft protection. So, lets say, for example, that you go to the gas station and get a candy bar. BUT, you only have a dollar left in your checking account and the candy bar costs two dollars. Never fear! The bank will protect your overdraft by charging you a large fee-basically, an automatic loan.
There are now a number of lawmakers and consumer groups that are urging Congressional leaders to include overdraft reform in a package concerning the regulation of the finance industry. One of the main arguments against this kind of overdraft “service” is that American taxpayers have bailed out Wall Street banks already, and are now having to endure dealing with abusive fees from those they rescued.
Last November a report was released by the Federal Deposit Insurance Corporation that found that overdraft fees ranged from $10 to $38 on average. In 2007,the Centers for Responsible Lending,who generally speak out quite frequently about payday loans-by the way, reported that overdraft fees bring in about $17.5 billion each year.
Another major issue is that most banks automatically enroll their customers in the overdraft protection program without their knowledge or consent. There also is no system in place that will warn customers that a potential purchase will send them into overdraft territory.
These are large concerns and are, luckily, finally being recognized and addressed. Instead of going after short-term payday loans as the only financial entity that should be regulated, there is finally attention going to those who are hurting consumers unknowingly and aggressively.
