Have you had it up to here with your bank's overdraft protection schemes? You aren't alone, according to the Center for Responsible Lending. (Photo: flickr.com)

If you’re able to see past the shady origins and history of the Center for Responsible Lending, you’ll see that occasionally they do good work that benefits society. While they’re certainly no friend of the payday loans industry, I find that their recent report on the overdraft fees and overdraft protection rackets is worth noting for any financially conscious consumer. Personal Money Store wants you to be informed when it comes to your money, so take the CRL’s findings as a word of caution when it comes to the twisted world of overdraft fees and protection.

Major Overdraft Findings That Should Give You Pause

Overdraft fees and overdraft protection costs have skyrocketed in recent years. According to the CRL’s findings, there are three shocking points of which we should all be aware:

1. Overdraft occurs frequently. Over a 12-month period, the CRL found (based upon Federal Reserve data) that more than 50 million Americans overdrew their checking at least one time. Of those, more than half (27 million) had five or more.
2. How much operating income did overdraft feeds produce for banks and credit unions in 2008? Try $24 billion. Broken down, it’s been noted that a credit union could derive as much as 60 percent of their operating income from overdraft fees and overdraft protection.
3. Think overdraft is under control? Think again. From 2006 to 2008, the CRL found that banks and credit unions upped the penalty by 35 percent.

Were You Even Asked to Opt Into This?

For most people, the answer is no. When you sign up for a checking account at your bank or credit union of choice, you’re automatically enrolled in an overdraft program. And buried in the fine print of your contract is the overdraft fee schedule. Generally, transactions consumers don’t have the money to cover are automatically paid by the bank or credit union. What the consumer gets for the trouble is a penalty per transaction in the neighborhood of $34. Furthermore, banks and credit unions tend to charge an additional daily fee for as long as a consumer’s account balance remains overdrawn. Regardless of whether an account is overdrawn by $100 or $.01, fees can mount – and no bank or credit union I’m aware of works on a sliding scale. It’s all about flat fees that the consumer must pay. And CRL research indicates that for every $1 in overdraft protection credit extended to consumers using their debit cards, $2 in fees are assessed.

The Banks’ Defense

It’s all about protecting a consumer’s good name, they might say. By providing this “service” to customers, banks and credit unions claim they’re keeping people from bouncing checks. NSF fees from banks, bad check fees from merchants and (potentially) other late fees could amount to a person’s picture being hung on the wall in mug shot-like splendor.

Bouncing Checks Aren’t the Story, However

Debit card and ATM transactions are the big issue. The CRL finds that if banks and credit unions wanted to, they could simply decline transactions that would put consumers in the red. However, most do not do this. They pay for the transaction but “help” the consumer by severely penalizing them. While consumers should certainly be responsible with their money, digging unnecessarily deep holes for them to try to climb out of after they’ve already made mistakes is a questionable tactic on the public relations front. In the end, it comes across as a money grab.

The Reordering Transactions Shell Game

Did you know that banks and credit unions reserve the right to reorder your banking transactions from highest to lowest, even if the lesser transactions occurred first? This catches millions of consumers who gamble that a large expense won’t clear until after their paycheck is deposited. If you’ve ever done this (I know I have), know that you’re playing a losing game.

Automatically Dragged Over the Coals

This is what John and Jane Consumer typically get when they sign up for a standard checking account. Many aren’t even aware that cheaper options are available. Some banks may offer a cheaper, more formal line of overdraft credit, or even a link to a savings account in the case of overdraft. However, even these can be expensive. Payday loans, when used properly, can cost even less. Did you expect me to say otherwise?

A Terrible Trio for Consumers

Using FDIC data from 39 member banks, the CRL digs into just what the overdraft fee jungle means for consumers. They do this by addressing the three points raised above.

1. Overdraft Occurs Frequently

Of the 6.5 million accounts held in the FDIC sample, around one in four experienced at least one overdraft over the course of a year. One in seven experienced five or more. As mentioned earlier, this translates to about 51 million Americans stuck in the overdraft fee quagmire. Those with five or more instances are sinking beneath the muck. The CRL found that repeat offenders tended to be of lower income, single, non-Caucasian renters. Considering that the FDIC points to the 18 to 25 age group as being most likely to fall into the overdraft trap, it seems that more effective financial education is in order. Learning to control excessive impulse spending, balance the checkbook and consider options like payday loans in emergencies could help anyone.

2. Excessive Overdraft Fee Profits

Banks and credit unions are conveniently not obligated to report what they make on customers’ overdraft fees, but the FDIC did manage to compile from a sample of its member banks. They found that that around 69 percent of their service charge income came from NSF fees. Extrapolating the data, the CRL finds that this amounts to $34.3 billion in fees for 2008 alone for all service fees. Sixty-nine percent of that is $23.7 billion, a staggering sum that should be much lower. As banks, credit unions and even credit card companies are jacking up fees, that figure could be even larger in 2009.

3. Fees are Out of Control

As I was saying, overdraft fees are a source of concern for any consumer who depends upon the traditional banking industry to care for their money. As the collection has increased 35 percent from 2006 to 2008, the CRL wonders if there’s a ceiling. Organizations like the proposed Consumer Financial Protection Agency and the Credit Card Bill of Rights are designed to help make right what has gone so far wrong, but will they have the healthy canine teeth to tear away the sweet meat?

As mentioned, fees for individual overdraft transactions and days a balance is in the red are commonplace. A cup of coffee, a tank of gas and a few miscellaneous convenience store purchases can quickly and silently become hundreds of dollars in overdraft fee debt. The CRL finds that the monthly average for individual debt card usage is 17. More than a quarter of those are for less than $10.17 on average. Imagine the possibilities across the banking industry. Since this use has exceeded credit card use since 2005, it’s also no wonder that the credit card industry has sought myriad ways to charge their customers with fine print clauses.

Fruits, Vegetables and Overdraft Fees

That sounds like part of a balanced diet these days. The CRL frightens us all with the details of how Americans spend “about the same amount” on overdraft as they do on fruits and vegetables. As for grains and other essentials like postal stamps and books, overdraft fees are clearly in the lead, say the CRL. Considering how difficult financial matters are during the recession, is it any wonder that the CRL found that most consumers would prefer that a transaction be denied than to have to paid exorbitant $34-per-transaction overdraft fees?

How Can This Problem Be Fixed?

This is your checking account on overdraft protection. (Photo: http://tolweb.org/)

Beyond preparing consumers to make sound financial choices, the financial abuses inherent in the traditional banking system must be exorcized. The Federal Reserve is considering that very matter, as is Congress. Large-scale change is needed.

Prohibit Overdraft Fees on Debit Card and ATM Transactions

This exception would be a welcome aid. If a fee is absolutely necessary, then a bank should have to provide a more highly visible, real-time warning so that debit and ATM infractions don’t fly under the radar and destroy overtaxed consumers’ budgets. If warning sign appears, consumers would have the choice to back out of the transaction (if the merchant didn’t simply rule out that method of payment). Some banks and credit unions block such transactions completely. The CRL suggests that all should follow the practice.

Overdraft Fees Should Be Proportional

The CRL’s finding that the amount that banks pay out to merchants for consumer overdraft is about half of what they actually charge consumers for the “convenience” is another signal beacon that change is needed. Flat fee overdraft charges are unnecessary when compared with the actual cost of covering the overdraft to banks and credit unions. It is understandable that banks and credit unions have to think of profit margins, but the current overdraft fee system is tantamount to gross customer abuse. The CRL suggests that an overdraft line with a reasonable rate of interest would be easier for consumers to swallow. Then again, rather than dealing with revolving interest, why not use payday loans?

There Should Be a Limit

If a consumer dashes their checking upon the overdraft fee rocks, banks and credit unions should be required to offer an alternative product at lower cost. A consumer shouldn’t be allowed to rack up more than six overdraft fees per year, says the CRL. This is what’s called weaning traditional financial institutions from their habits of excessive profit. Getting by with a reasonable profit margin may mean fewer executive retreats to Cabo San Lucas, but it’s the right thing to do.

No Overdraft Protection Without an Opt-In

This is self-explanatory. No service or accompanying gross fees should be thrown at a consumer without their approval. The CRL found that around 90 percent wanted to be able to choose whether they would have overdraft protection or not, so banks and credit unions should listen. If not, they run the risk of losing even more customers to payday loans when financial calamity strikes. Banks and credit unions certainly have a larger war chest to draw from, but that doesn’t mean they shouldn’t try to be competitive.

Make Banks Toe the TILA. Payday Lenders Do!

The Truth in Lending Act requires that lenders disclose certain information to the public. It seems that information regarding the amount of money banks collect in overdraft fees should be included in the purge, much the same way payday loan companies make their APR known. Since overdraft protection is an act of extending credit to a consumer, banks and credit unions should be forced to clarify just what they’re charging customers. No bank or credit union should be exempt from the law.

There’s Nothing Up My Sleeve

The Consumer Financial Protection Agency is on its way. President Obama made a great deal of show about the related Credit Card Bill of Rights. It’s time for banks and credit unions to be made to tow the line. If you’ve even gone through the hassle of dealing with overdraft, you know that there has to be something better behind the curtain. In the case of payday lenders, there’s nothing “up the sleeve.” In a short term financial emergency, payday loans are up front about fees, which typically are much less expensive than falling back on overdraft protection. The consumer should have the power to choose what fits their financial circumstances best.

Related Video:

EPPICard seems simple enough. But consumer experience has been checkered by misplaced funds, service problems and identity theft via online phishing scams. (Photo: http://www.jokqt.qkpy.com/common/imagelib/index.htm/1138_500_250_crop_e6393.jpg)

When you’re unemployed, your unemployment check each week is a real life-saver. Sure, most of us aren’t that far removed from living on the street if our jobs ceased to exist. That’s a disturbing reality that many Americans face in a system that has lost the ability to regulate itself. But what would you do if you had difficulty accessing your government unemployment checks or child support funds. It’s your last line of defense in a financial emergency, and you aren’t eligible for money loans without a job.

That’s what some have faced with EPPICard

EPPICard is a company that was contracted by various state governments to handle the distribution of unemployment and child support monies. The money is placed on a check/debit card that is supposedly easy to use at any retailer or ATM machine. However, this has not always proven true, according to the Web site Consumer Affairs. Not only have some people had difficulty accessing funds at some establishments, but there have been reports of missing money that should have been there and phishing scams perpetrated by individuals outside of EPPICard. Consumer Affairs reports that in 2008, Indiana Attorney General Steve Carter issued an alert about bogus messages via text, voice and E-mail that all claimed to be from EPPICard. Consumers who replied to those messages were tricked into giving up sensitive personal information that placed them in the line of fire for identity theft. The most common method used in the phishing scam was to send EPPICard customers messages claiming that their account had been closed due to “unusual activity.” Carter advises that if said attacks reoccur, consumers do not reply.

The EPPICard Web site (which I won’t link to because my browser suspects the phishing/hijacking is still going on there; see the photo below) states that the company will never ask for social security numbers, card numbers or PIN numbers via text, voice or E-mail. If there is a problem, an EPPICard  holder should call the number printed on the back of the card ONLY.

Other problems consumers have had with EPPICard

This is what my browser told me when I attempted to view eppicard.com. Consumer beware!

Deborah of Kershaw, South Carolina wrote on Consumer Affairs that she cannot access her account information online because the Web site will not accept her username and password. Anita of Atoka, Oklahoma reported that money left over from one distribution period did not carry over to the next period. Her calls to customer service consisted of multiple people telling her there was no balance, even though she kept careful records. Teresa of Henderson, Nevada took issue with the 35-cent charge for customer service calls to the company, as well as the general difficulty of reaching a live person. These people are just three of many who have had difficulty with EPPICard, and I’m sure many have needed money loans to make up for the trouble.

There are reports that EPPICard has worked to resolve these service issues, however. Check out the second YouTube video below. Harold of the “Harold Says” consumer advocacy Web site claims they told him they promise to work to fix the issues that have been plaguing some consumers, that they “take these concerns seriously.” That doesn’t necessarily mean the problems have been fixed, however. So I say consumer beware. Hopefully you don’t live in a state like Indiana that depends upon EPPICard to distribute unemployment and child support funds. If you do and are eligible for money loans, keep the number on speed dial or just click the button below.

Related Videos:

Phishing and EPPICard

EPPICard and damage control

NCR stands for National Cash Register.

When NCR Corporation relocates its headquarters from Dayton, Ohio, to Duluth, Georgia, it won’t just bring jobs, it’ll bring cash.

That’s because NCR Corporation is in the ATM manufacturing business. According to NBC News:

NCR Corporation will locate a new global self-service innovation headquarters in Duluth and a manufacturing site for the company’s next generation NCR SelfServ ATM family in Columbus.

Georgia’s economy

There are 15 Fortune 500 companies and 26 Fortune 1000 companies with headquarters in Georgia, including such names as Home Depot, UPS, Coca Cola, Delta Air Lines, AFLAC, Southern Company, and SunTrust Banks. Georgia has over 1,700 internationally headquartered facilities representing 43 countries, employing more than 112,000 Georgians with an estimated capital investment of $22.7 billion, Wikipedia says.

Georgia’s unemployment rate currently is 9.1 percent. That’s higher than the national unemployment rate, 8.6 percent. While Georgia hasn’t hit double-digit unemployment rates like states such as Oregon and Michigan, it is slowly creeping in that direction. Many unemployed workers get behind on bills and end up needing credit repair. Luckily, there are experts to help.

NBC says that at a news conference today in Georgia NCR Corporation will announce its plans to relocate, and “Gov. Sonny Perdue will be on hand to welcome the company to Georgia.” That’s a sure sign that the state is eager and pleased to accept NCR Corporation into its economy.

How many jobs?

Georgia’s NBC affiliate news station says the NCR Corporation move will bring 1,250 new jobs to Duluth and 870 new jobs to Columbus.

Last year the company brought 916 jobs to Peachtree City in support for its worldwide customer services business.

More on NCR Corporation

NCR Corporation started out as a cash register manufacturing company way back in 1884. The company manufactured and sold the first mechanical cash register.

NCR Corporation continued in the cash register business and during World War I expanded to manufacturing shell fuses and aircraft instrumentation. During World War II, it  built aero-engines, bomb sights and code-breaking machines, according to Wikipedia.

Transition to high techonogy

NCR Corporation stayed with or ahead of the curve on the technology front, and in 1952 it acquired Computer Research Corporation. According to Wikipedia:

In 1956, NCR introduced its first electronic device, the Class 29 Post-Tronic, a bank machine using magnetic stripe technology. With GE the company manufactured its first transistor-based computer in 1957.

NCR made its first ATM in 1970, and it’s been making them ever since. NCR Corporation holds about a third of the ATM market. This will only widen the broad industry base already present in Georgia.

Food is also a major industry in Georgia, with widespread farms producing peanuts, corn, and soybeans across middle and south Georgia. The state is the number one producer of pecans in the world, with the region around Albany in southwest Georgia being the center of Georgia’s pecan production. Gainesville in northeast Georgia touts itself as the Poultry Capital of the World.

Industry in Georgia is quite diverse. Major products in the mineral and timber industry include a variety of pines, clays, stones, and sands.