May 17, 2010
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New Fees, Old Fees, Pt.2
The bridge to high interest earnings.One might wonder what made banks and credit card companies think it was ok to gouge the pockets of Americans. The Federal Reserve that regulates and oversees the financial industry including credit card, came down on banks in regard to debit card over-drafts. However, the rules didn't specify how banks should apply and deduct checks. If four checks should present for payment on the same morning, unjust banks began paying the checks and debit card swipes from highest to lowest. The practice forces several small expenses into over-draft rather than one larger transaction thereby bringing banks two, three or four over-drafts fees rather than one. Banks discovered an easy way to make up for the shortfall of credit card reform by lining up these transactions from highest to lowest. With the method, it is possible that a consumer with four small debit card transactions under $10 each could bring $200 in fees.
President Barak Obama supports the implementation of a new Consumer Protection Agency that will oversee the actions of credit card companies and banks. Senator Christopher Dodd (D0CN) is a consumer advocate and supports the consumer protection agency. He believes banks will further seek loopholes in the credit card and financial reform and that Americans need to be aware of what banks are charging.
Another loophole exists in the law that deals with risk based interest rate. The law allows lenders to raise interest rates on credit card accounts that experience a 60 day late payment. However, by law, the lender must also review the accounts and lower the interest rate back down if the cardholder has been at least six months on time. Under the new proposed Fed rule, although banks will be required to review all accounts where interest rates have increased since January 2009, the review is not held within stringent guidelines. This would mean that if the banks took six months to review and revert the interest rate back all the while the company would continue to pull in more interest earnings. From the outside looking in, consumers might begin to think the government passes protection laws as a bridge for the financial institutions to enable it to dig even deeper into the pockets of hardworking Americans.