November 19, 2009
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News: Lawmakers Want Banks To Stop!
Credit card companies will soon be experiencing stiffer rules on the regulation of credit card management and processes which have driven them to step up abusive practices in a last ditch movement to beat down consumers down even further before the bills enactment date. Meanwhile, having bleed Americans to death, banks have been on a silent attack on debit card customers. In an honorable move, many credit card customers have switched to debit to reduce spending. Unfortunately, the banks who have aggressively pushed Americans to use debit cards have abused their power as well. The practice of bank's automatically paying over-draft transactions without notifying the consumer and then charging high multiple fees has received a great deal of criticisms in recent weeks.
Banks have been under fire by debit and credit card consumer advocates and have petitioned the Federal Reserve to take action to stop these practices. Representative Carolyn Maloney, (D-NY) wants banks to alert customers when a debit card purchase is about to initiate an over-draft situation. She also wants to prohibit banks from processing the highest dollar transaction first on any given day. Banks have made millions of dollars on over-draft fees by running the highest transaction through first and thereby sending multiple small transactions into an over-draft situation. Banks then charge an average of $35 for each transaction virtually stealing hundreds of dollars from consumers. Like the credit card industry, banks have not been very receptive in eliminating these abusive practices; therefore, it appears lawmakers will once again need to play hardball.
Similar to credit card legislation that requires lenders to provide an opt-in option when card holders go over their limits, the Federal Reserve is looking into mandating that banks offer some sort of opt-out option for over-draft protection. Over-draft protection wouldn't solve the problem of customers racking up high over-draft fees because the fee would remain the same for each over-draft transaction. It would, however, prevent the bank from paying any transaction without permission which would generate the over-draft fee. Again, banks defend the fees by saying it's a service that customers pay for to prevent the embarrassment of having a debit card transaction rejected.