You know that overdraft fees are a big hassle. Of course! Everyone knows that. When you have no money, the bank lets you spend money you don’t have, and then charges you an extra fee on top of it: going over your checking by even one penny can cost you upwards of $50. It is, as we have documented here before, the biggest ongoing scam in America.
But here is what you might not know – the Big Banks are counting on your overdraft. They encourage it, they support it, they even re-structure their charges to maximize the number of fees you have to pay.
In other words, an overdraft fee isn’t just an inconvenience, it is a weapon used by the banks to rob you of every single dollar they can.
Here is an eye-opening bit of recent history:
- 2010: A California judge rules that Wells Fargo manipulated its transactions in order to charge the maximum in overdraft fees possible. Wells Fargo was ordered to pay $203 million in restitution.
- 2011: Bank of America ordered to pay $410 million for manipulation of transactions, structuring them to cause the maximum amount of overdraft fees.
- 2012: Forbes magazine and the Consumer Finance Protection Bureau issue a report saying this illegal practice is still ongoing.
- 2014: Banks collect a total of $35 billion in overdraft fees.
(For more information, check out this great article here, which goes into much greater depth.)
What this shows us, quite plainly, is that “overdraft protection” is designed as an additional revenue stream – a way for banks to trick people out of their hard earned money. It allows the banks to hold your account hostage, and unlike any other form of borrowing, they don’t need your permission to take the money from you. Since they have access to your bank account, they have free reign to reach in and take however much they want from you.
And if they can’t take enough? Then they close your account, and make it impossible to get a bank account anywhere.
Overdraft fees are the biggest ongoing financial scam in America, and no one is fighting against them.
What Does This Have to Do With Payday Loans?
It’s the War on the Poor personified, a way that major institutions place usurious penalties on the lower classes in order to support the rich. And it’s condoned by society, the law, and the government.
The CFPB, an organization designed with the sole purpose of protecting the finances of working class Americans, has become so laser-focused on attacking the payday loan industry they ignore dangerous and unethical violations from the “Too Big To Fail” banks.
As we saw in the figures above, banks have a history of manipulating transactions to inflict the greatest financial impact on their own customers. And according to the CFPB itself, this practice is ongoing. If the total for 2014 (the most current figures available at the time of this writing) was $35 billion, how much is it now?
How much money are they draining from the accounts of hard working people? And why isn’t the CFPB doing something about it?
Be very wary of overdraft fees. If its possible, decline the “overdraft protection” at your bank… but it may not be possible! And remember, payday loans are a short term, small dollar loan that you pay back from your next paycheck. Borrowing $100 from a payday lender will actually BE CHEAPER than incurring an overdraft charge.
The banks don’t want you to know that – that payday loans are a cheaper alternative to their scams – but it’s the truth.