A recent article " 'Bank on Dallas' reaching out to low- and middle-income residents" highlights a Dallas Texas inititative and campaign "Bank on Dallas – It's Safe and It's Smart" that is being pushed by Mayor Tom Leppert and council member Jerry Allen, along with Jim Reid, president of the nonprofit Momentum Texas Inc. The program which is "designed to help
low- and moderate-income Dallas residents establish savings, build
credit history, gain access to low-cost sources of credit and invest
for the future" is officially underway.
While I aplaud the efforts to help low and moderate income people, or for that matter the population in general, a recent FDIC Study of BankOverdraft Programs seems to indicate that Bank on Dallas might be reaching out for something else.
The study examined data from 1171 banks with 6.5 million customers across the US and found that 86% of the banks had an overdraft program and that 71% of the banks automatically opt customers into the program. The study showed the average overdraft fee was $27.00 and that a customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of 3,520 percent . The study found that 94% of the $1.7 billion in overdraft fee revenue came from customers that overdrew their account an average 5 times per year, while as many as 10% of customers overdrew their account as many as 10 times per year. Just 5 overdrafts per year would generate $135.00 per year in revenue for simply failing to deny a customers transaction, most often at the point of sale. Across a customers working lifetime, an average of 65 years, that equates to nearly $9000.00 in revenue.
The stated goal of Bank on Dallas is to "generate at least 25,000 new accounts over a two-year period and provide the opportunity for free financial education" . Based on study data, the Dallas consumers would potentially generate an additional $1.35 million dollars worth of revenue per year, or $81 million dollars in overerdraft revenue across an average 60 workling year lifetime. This is a far cry from the $40,000 that Bank On Dallas is trying to save them from spending on cashing checks at other institutions, especially since they might have also get roped into a 350% APR payday loan instead of a 3520% apr overdraft fee.
According to these numbers it makes perfect sense that Bank on Dallas has partnered with the Federal Reserve Bank of Dallas, and other Dallas banks and credit unions such as Capital One Bank, Chase Bank, Citi Bank, Wells Fargo Bank, Comerica Bank, Bank of Texas, Regions Bank and Neighborhood Credit Union. It also seems that their $58,250 funding contributions was a steal for the potential $81 million dollars in revenue they stand to gain from their 25000 new customers.
It is also no surpirse that non-profit organizations sponsored by Banks and Credit Unions are working with local governments to pass legislation across the US to drive out their competition by limiting APR's that overdraft protection products aren't subject to.
It stands to reason that you, as a consumer might need to watch our, for those that decide to watch out for you !!
For the full article by Robert Miller visit DallasNews.com