Overdrafted

As if I needed an additional reason to detest financial institutions: Overspending on Debit Cards Is a Boon for Banks [New York Times, h/t @kingkaufman]

“Everyone should know how much they have in their account and manage their funds well to avoid those fees,” said Scott Talbott, chief lobbyist at the Financial Services Roundtable, an advocacy group for large financial institutions.

Hey, Scott, how about you just fuck off with that nonsense? You’re providing to users a service that most of them probably don’t want by default. You’re obviously making a ton of money on loaning someone five bucks to buy lunch when they miscalculated and slightly overdrafted with that very reasonable $34 overdraft charge or you wouldn’t be complaining about the government turning their eyes on debit card legislation similar to recent credit card law overhaul.

Banking industry mouthpieces in the article warn that there are institutions which make more in overdraft fees than they do in profit, and that any such institution would be in danger of going under. Good! That means there are banks that either don’t make most of their money ripping their depositors off or aren’t afraid of making their overdraft policies palatable enough to be described up front so they’re not concerned with everyone opting out, and I’d like those banks to win please. I’ll no more mourn the loss of a bad bank than I did the telemarketers who lost their jobs after the Do Not Call registry was created. Get employment with an outfit that’s actually making the world a better place, people.

Banks also warn that they might have to do something like start charging for “free” checking accounts to make up for the lost income. No problem! Checking accounts are a legitimate service provided, not a scam, and charging for them is reasonable. It’s also more honest than running your business with usurious short-term loans, paid in large part by the segment of your customers least able to afford it.

Later in the article:

“If you think about when you swipe your card at, let’s say, Starbucks or at the Safeway or the Giant, there is no real sort of interaction there,” said Mr. Talbott. “It’s just approved or disapproved. So how logically would that work? Would a screen come up? Would someone at the bank call the checkout clerk and say, ‘That customer is overdrawn?’ Logistically that would be very difficult to implement.”

Oh come on. Ballistic Terminal Services provides a quick overview of how credit and debit card processing works. Here is an excerpt:

2. The processor will then pass that information onto the bank that issued the credit card. The issuing bank will then check the validity of the card and see if the requested amount is available. If it is the bank will set aside the amount of the purchase for the merchant.

3. The card issuing bank will send back either an approval number or a decline message back to the processor.

4. In approximately 12-15 seconds the information will be sent back to the credit card terminal which, if the transaction was approved will print a receipt for the customer to sign.

and here’s how the process would work with a notification step:

2. The processor will then pass that information onto the bank that issued the credit card. The issuing bank will then check the validity of the card and see if the requested amount is available. If it is the bank will set aside the amount of the purchase for the merchant. If the card is valid but the requested amount is unavailable, the bank may choose to extend an overdraft offer to the cardholder rather than denying the transaction.

3. If overdraft offer is generated, the fee amount and total transaction fee will be sent back to the credit card terminal in approximately 12-15 seconds. The user has the option of accepting the offer by pressing “Yes” or “Accept” or similar. The processor will then pass that information onto the bank that issued the credit card.

4. The card issuing bank will send back either an approval number or a decline message back to the processor.

5. In approximately 12-15 seconds the information will be sent back to the credit card terminal which, if the transaction was approved will print a receipt for the customer to sign.

Was that so hard? I’ve never seen a credit/debit card terminal anywhere that accepts debit payments that didn’t at least look software-upgradeable–push out a software update and send out a bunch of individual pieces of paper describing the very simple and easily-understood change. You can even print this post and use it if you like. (And for the terminals that can’t be made to work this way, buy better stuff next time.) And by the way, I’m sure phone number portability was a technical pain in the ass too, and once we all decided it would make our life better and demanded it, it happened quite quickly and easily.

At Bank of America, you can’t even opt-out of overdraft protection unless you’re granted an “exception”. That’s just another in the series of reasons I’m really glad I don’t bank at Bank of America any more. There’s simply no good reason to not allow someone to opt out of such a practice by calling unless you’re just intent on ripping them off.