Overdraft fees are a menace
I know the damage bank overdraft fees can do to a person’s finances and self-worth.
For all his adult life, I helped my brother Mitchell manage his money, although he insisted that he handle his own banking. Mitchell, who died at 32, suffered severe seizures because of his epilepsy. As a result, his only source of income was Social Security disability.
My brother, who barely had enough income to cover his necessities, did his best to live within his means. But a few times, he overdrew his bank account. When he did, he would berate himself.
In one incident, a single debit card swipe resulted in multiple overdraft fees totaling a few hundred dollars.
“I’m so sorry,” Mitchell said when he showed me his bank statement. He cried as he fretted about how he would make do that month. He wasn’t being reckless. He just didn’t have any cushion for any money mistake.
Overdraft charges and non-sufficient-fund fees are a menace to the most financially vulnerable, like my brother.
So, it’s worth noting that Capital One, one of the nation’s largest banks, says it’s eliminating all overdraft fees and non-sufficient-fund fees for its consumer banking customers.
Could this be a trendsetting move for other big banks, which rake in the most money in overdraft fees?
I certainly hope so, but if it isn’t, the Consumer Financial Protection Bureau (CFPB) ought to step in.
A few other financial institutions have already eliminated overdraft fees, but as Capital One pointed out, it’s the nation’s sixth-largest retail bank and stands alone among the top 10 banks in getting rid of the fees. Capital One customers enrolled in overdraft protection will automatically be converted to its no-fee policy early next year. For bank customers not enrolled, transactions that would overdraw their account will be declined, with no fees assessed, the company said.
“The bank account is a cornerstone of a person’s financial life,” Capital One’s founder and chief executive, Richard Fairbank, said in a statement. “Eliminating overdraft fees is another step in our effort to bring ingenuity, simplicity, and humanity to banking.”
I was struck by Fairbank’s use of the word “humanity.”
For years, consumer advocates have been critical of the abusive nature of such fees. They are menacing and inhumane.
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