Jun 4, 2013

The One Where US BANK Implements A "Poor Tax"

On August 15th 2010, the Federal Reserve issued a ruling that prohibited the various big banks in the United States from charging their customers overdraft fees unless they personally opted in.  See a lot of times customers would automatically be opted in, which led to instances of you ordering something for $0.99 and then that charge pushing you into the red, and incurring a $35 overdraft fee (YMMV).  

Via Bankrate.com

Overdraft protection is a service offered by banks that allows checking account holders to temporarily make purchases with a debit card even if they don't have sufficient funds in their account to cover them. In effect, the bank makes a short-term loan to the account holder so his debit card isn't declined at the register or an ATM machine. In return, the bank charges an overdraft fee of $10 to $35, according to an informal Bankrate survey.

The banks clearly were not thrilled with this sudden intrusion on their money making scheme.  How much money do the banks make off of overdraft fees?  Well, just look at it this way.  In the 1st quarter of this year (2013), the U.S. Banks made a record $40.3 billion dollars (with a B) largely due to overdraft fees which are incurred by those who have opted in to the program.

Think about that for a minute.  This is just from January to March of THIS YEAR.  $40.3 BILLION dollars, an all time record.   You would imagine, then, that they are sitting pretty, right?  They have to be happy with all that money rolling in.   However you would be wrong, Sir or Madam.  How wrong are you?

The following email is one that I received today as a customer of U.S. BANK.  I've omitted some of the personal information as to my account and finances, but left everything else.


As you can see under the "What's Changing" section, they have decided to implement what could rationally be referred to as a "Poor Tax".  As in, "We're going to charge you because you don't make enough money to make US money."

See, when the August 15th 2010 deadline came and went, that removed a chunk of potential money from the US Bank (and other banks) coffers.  I opted out immediately, as did a lot of people I imagine who were tired of being ripped off by their tactics which included some banks engaging in something called "Reordering"Note that in that link I just provided, it names several banks that are known to be guilty of this, including Bank of America which settled a 400 million dollar lawsuit over it.  US BANK, was not one of those listed. I don't know if they engaged in "reordering" or not, so I am not intending to infer that they are or have.

Reordering is when say you have $100 in your bank account.  You have six checks out.    You anticipate having your paycheck in in time to cover all of that, but something goes wrong and your boss is late paying you or you had to work late and didn't get to the bank in time to cash it.  Any number of things can and do go wrong. So say you wrote those six checks, one for $95 and the others are all $10 each.

Now the logical and rational thing for the banks to do is to process the charges one by one as they come in, however there's no money in it for them if they do it that way.   So what they'd do is they would process the $95 check first, leaving you with a balance of $5, and then start processing the smaller checks, causing you to bounce five checks instead of just one.

What does this mean?  Well, this means you just were the recipient of a Bank Reordering.   And you, my friend, just found out that your bank account is now not a simple -$50 it's a -$200.  That's the $50 for the bounced check and the $150 ($30 x 5 checks) in bounced check fees. Often times that's $30 a DAY until it's paid off.   Now how big a paycheck were you going to put in there again?


So when the Federal Reserve passed that rule, that meant the Banks had to come up with funds somehow.  Which means that those money orders you might need to get?  They're gonna cost you.  I once asked the local US Bank branch about getting a money order while I was there, and the woman looked at me, and the expression on her face said she knew what she was about to say was fucked up but she said "It's $5.00" After a few seconds I looked at her and was like "Because they can't charge the overdraft charges anymore?" and she just nodded.  And so I went and got the money order from somewhere else where it was 50 cents.

And now, you have what can really only be referred to as a tax on low income customers.  This isn't going to hurt those who have money, it's going to hurt those who have the least.   And yeah, that $6.95 or $8.95 isn't going to bankrupt anyone or put someone in the streets out of their home, but it's the principle of the thing.  These banks made $40 BILLION DAMN DOLLARS over the course of four months, and now they're taking money away from the most vulnerable of the society because they can't nickel and dime them anymore?

 This is disgusting.   I commented about this on Twitter and a US Bank customer service flack saw it and wrote this wonderfully tone deaf statement:

Yes, US BANK, your email made it very clear that this "maintenance fee" is not applicable to "Most People", and that there are two ways to avoid paying this.  Either have $1,000 in "Direct deposit" each month or maintain an average balance per month of $1,500.

What about those, like myself, on disability who don't quite make that $1,000 mark?   What about low income members of the community whose sole paycheck comes from working at non-profits and often don't come close to getting $1000 a month?   Why are you singling out the most vulnerable of your customers, the ones who can least afford it?

Essentially the response by US BANK about the "maintenance fee" is that there's a simple way to avoid the charge: Don't Be Poor.  Just stop being poor, and you won't get that poor tax ...I mean "maintenance fee". To be clear, US Bank isn't the only one out there targeting the low income customers for services that will stick them with multiple fees, but they are an egregious example.  And no one is saying that they shouldn't be able to make money, that's what banks do.  That said, there's surely ways to make money that doesn't unfairly target the most vulnerable customer base.  The ones with the least amount of money to spend on "maintenance fees".

Is there still anyone out there that doesn't understand why Occupy Wall Street is so important?  Anyone still insisting that OWS is the bad guys in this scenario?

1 comment:

  1. I stopped banking at Chase, one of the more greedy banks, 2 years ago and transferred to a local Credit Union. They perform the banking function for me, without dipping their fingers into my funds.


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