…most recently in our financial markets. Now the Feds are expanding their hectoring of our financial institutions over their fees. The Federal government already has chosen to prevent them from making money the old fashion way—through lending—with its artificially suppressed interest rates. It’s already inveighed against them over one set of fees which they charge as a means of earning a profit for their owners—our fellow Americans.
Now the government is going after another set of fees, with their objection centered on the fact that these Know Betters just don’t like the fees.
The Consumer Financial Protection Bureau, a creature of Dodd-Frank that is responsible and responsive to no one, has begun the process of obstructing the collection of overdraft fees—the fees charged when folks write checks with insufficient funds to cover them, so the bank covers the bad checks or transfers funds from the check-writers’ savings accounts (with the check writers’ prior permission) to cover the bad checks.
Usually, such bad checks result from a moment of carelessness. More than occasionally, though, those bad checks are written by serial offenders, who rely on those overdraft processes to make their bad checks good.
Of course, the CFPB has said
it has no immediate plans to issue or recommend new overdraft-fee rules.
This is disingenuous, though: the criticism by a government agency has its own intimidative effect. For instance,
In 2011, Bank of America Corp, the second-largest US bank by assets, quickly abandoned plans for a monthly debit-card charge of $5 after it was denounced by lawmakers….
Nevertheless, the CFPB is bellyaching that
heavy users of overdraft coverage pay about $900 a year more than consumers who don’t incur overdraft fees.
This is bad how, exactly? Why should responsible customers have to subsidize the careless ones for their carelessness? After all, the costs of making good on those bad checks have to be covered somehow—if not through fees paid by the bad check writers, then by spreading those costs across all the bank’s customers, responsible and…careless…alike.
The best way to hold down the annual costs of writing bad checks is for government to stay out of the market place and for the writers to stop writing bad checks.
The Jack Daniel Employees’ Credit Union charges $10 when a customer overdraws on an account. Pam Case, manager of the Lynchburg, TN, credit union, said keeping the fee low helps lure customers. “They like that we don’t have a lot of fees,” she said.
Which demonstrates how well the competition of a free market regulates fees.