USA Today published an article recently that dove into current bank practices and fee hikes to cover losses. The article can be found here. This article is a prime example of why I, and some other investors, decided to start a bank that refuses to charge overdraft fees. We realized that people…
Read the full story »You can best help yourself and others if you will list the overdraft date, fees and the applicable bank or credit union in the data base…click here
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Here I discuss ways to cover yourself without the fees that go along with overdrafts. I will continue to update with new alternatives to banks and checking accounts that will protect your money, rather than take it. Keep checking back for updates here! Read More
Tips and tricks for getting your money back from the bank that charged you overdraft fees. From little known laws to threatening legal action, I have scenarios and advice that can get your money back with relative ease… read more
After watching people struggle through dealing with fees charged by banks for purchases made under ridiculous circumstances as well as having dealt with fees myself, I’ve decided to help put an end to financial institutions stealing money away from honest, hard working people… read more
Why the CFPA will cost 75% of America more money
The Obama administration has proposed a new government agency called the Consumer Financial Protection Agency. This new government agency would have the power to set bank fees at a fixed amount. So no matter whether the sign above the door says Wachovia, Chase, Wells Fargo, or Bank of America, you will pay the same amount for a checking account.
One of the briefing papers on the CFPA put out by Pew argues that forcing banks to charge the same price will make them work harder for their customers. If the CFPA won’t let them make more money per customer, they’re going to have to get more customers. And to get more customers, all they can do to lure in customers is to make their checking accounts better: more features, fewer hassles, etc.
The CFPA sounds like a great idea. Instead of begging the bank to remove some of our fees, the bank is scheming ways to impress us so they can get our business.
But if we assume that the CFPA is designed to “protect” personal finances, there is no reason to institute it. The CFPA will end up costing consumers much more than they’re already paying, no matter how the CFPA plays its cards. Don’t believe me?
Nearly all of a bank’s income comes from fees, not from lending interest. And of those fees, overdrafts are what make the bank most of its money. Only 25% of America pays a single overdraft fee each year. If the CFPA wants to support the banking industry by forcing them to charge the same amount per account, the other 75% will have to make up for the amount that the overdrafters are no longer paying. The CFPA wants to charge you much more than 75% of American is currently paying, which is very little under the free checking system. I may be a member of the banking industry, but I’m also a member of a bank. I don’t want to pay tons of money for a checking account, and I know you don’t.
And just how much would the CFPA make you pay for a checking account? Here’s the scary part. The CFPA would be deciding that, not the banks. Banks are in the banking industry. Have been for quite a while. They know how much they need to survive and to grow, not the CFPA.
And what about those who can’t afford a checking account? My guess is that it will take the government several long years of suffering before they begin subsidizing these accounts. Translation: higher taxes.
And what if the CFPA gets yelled at by consumers and decides to charge less than the necessary cost for a checking account? Within a year, bank branches would begin closing their doors by the boatload. As great as “innovation” sounds to get your business, that innovation costs money. Just the automatic bill pay feature costs your bank over $200 per account. Some banks, and perhaps all of them, will simply not be able to afford “innovation” if the CFPA limits profit.
Only a few big banks will have enough business to rule the industry, or the government will have to start subsidizing the smaller banks.
And of course, there is the tax cost of adding another government agency. In 2008, the FDIC cost the nation well over $1 billion in operating expenses. You can expect something similar for the CFPA.
In short, the CFPA may sound like much needed protection. But the “protection” that it offers is protection for your money. And since 75% of Americans aren’t supporting the banking industry all that much, there’s no way around the CFPA costing most of you more than you’re already paying.
Anchor Link to Pew briefing:
http://www.pewfr.org/admin/task_force_reports/files/CFPA-FINAL.pdf
Many people wonder if prepaid debit cards are the answer to their overdraft woes. While prepaid debit cards sound like a good option initially, when you dig in you will soon discover that prepaid debit cards will take your money from you just as fast (if not faster) than overdrafts.
Yesterday Fed Chairman Ben Bernanke positioned himself against the Obama plan of creating a consumer protection agency in the financial industry. He stated that a new agency would lack the expertise the Fed currently possess …
USA Today published a great article on overdrafts (found here). This article covers almost everything I’ve talked about here on the site. It covers unfair practices, gives comments from some of the top people in …
The Washington Post published an article (article can be found here) talking about the current bank fee situation. It addressed the fact that many banks are increasing fee amounts, adding new fees as well as requiring higher minimum balances on checking accounts. Banks are using fee income generated by checking accounts to help soften the blows taken from the down economy and the mortgage crisis. We created Probity Financial Services to give customers a way of having a checking account without funding the banks financial situation. We didn’t start with failing
Found a great Southpark video on banks and investments. Take a look!
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