As I see it, two fundamental "rules" of the free market are embedded in this account:US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s, according to research. The fees are nearly double those reported in 2000.
The finding is likely to increase public hostility towards the financial sector, which has been under political pressure to ease the burden on consumers by increasing credit availability and lending more fairly after being bailed out by taxpayers.
The Federal Reserve is working on rules on overdraft fees, and rules on customer charges could be a priority of the Obama administration’s proposed Consumer Protection Agency if approved by Congress.
Data from Moebs Services, a research company, show that the crisis has prompted many banks to lift charges on overdrafts and credit cards in order to boost profits.
The median bank overdraft fee has this year rose from $25 to $26, according to Moebs, the first time it has gone up in a recession for more than 40 years.
“Banks are returning to a fee-driven model and overdraft fees are the mother lode,” said Mike Moebs, the company’s founder.
Overdraft fees accounted for more than three-quarters of service fees charged on customer deposits, he said.
- Bite the hand that feeds you: The taxpayers paid to bail out the banks; now they are providing the banks with the money to repay the bailout funds.
- The best opportunities are unregulated: Whatever the Government decides to regulate, something will be missed; and that will be the site of the next "mother lode."
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