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The Overdraft Trap: Banks Force Consumers Into Bankruptcy with Obscene Fees

Banks and credit card companies continue to beat up the public with unconscionable overdraft fees.
Written by Craig D. Robins, Esq.
Squeez’em ‘till they’re dry – that’s what the banks are doing to consumers with soaring overdraft fees
Even though Congress and the Obama administration have been cracking down on banks that have fleeced the American public with abusive mortgage and credit card practices, the banks still continue to trap consumers with some outlandish fees.

Banks and credit card companies continue to beat up the public with unconscionable overdraft fees      .

Over-limit fees” weren’t enough.  The banks have been charging even greater fees for what they euphemistically call the “courtesy overdraft fee” –  a fee the bank charges customers for being able to charge when they don’t immediately have the money available to pay.
Overdraft Fees Are Becoming Rampant
Overdraft fees are the single largest source of fees for banks.  This year, banks expect to earn an incredible $38 billion from overdraft fees, which is almost twice as much as the $20 billion they will earn from penalties such as late fees and over-limit fees.
ABC’s Nightline [1] recently highlighted the problems with overdraft fees which are pushing consumers deeper into debt in our difficult economy.  USA Today [2] also recently ran a cover story detailing the over-aggressive drive of banks to develop overdraft policies to milk the public.
How Overdraft Fees Work
A customer who already owes a balance fills up the gas tank, which purchase costs $30.  However, the typical bank then charges an overdraft fee of $35.  If the customer then makes a handful of other small charges the same day – say for a quick meal, some groceries and other incidentals, the fees for that one day will add up to $175 !!!  This relates to an annual interest rate that can exceed 5,000 percent.
Consequently, a typical consumer can be hit with fees in the many hundreds of dollars in a matter of days – fees which many consumers cannot afford to pay.
Some banks even engage in sneaky practices such as charging consumers before they overdraw by deducting a purchase when it is made, rather than when it clears.   This has the effect of pushing the account into the red even sooner.
With such excessive fees, it is no wonder that many consumers cannot pay them and are driven to file for bankruptcy relief.  In our Long Island bankruptcy practice, we see evidence of these outlandish fees on a daily basis. 
Legislators Are Being Forced to Introduce New Legislation to Curb Overdraft Fee Abuse
Our own Congresswoman from New York, Rep. Carolyn Maloney (D-NY), is currently proposing legislation which will require banks to get consumers’ permission to cover overdrafts, disclose APRs and pay transactions in a way that does not increase fees.
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