My wife, who works for a financial institution, got a letter in the mail in response to an email campaign her company had protesting legislation that will hurt consumers. Below is the letter she received, and after we will talk about the issue at hand:
Dear [Finance For Youth: The Wife]:
Thank you for contacting me about overdraft protection fees. I appreciate hearing your thoughts on this important issue.
As you may know, the Federal Reserve recently announced that beginning in July 2010 financial institutions will be prohibited from charging overdraft fees on transactions at automated teller machines and on debit cards unless the customer consents to such overdraft protection. It is important to note that customers will still have the option to enroll in overdraft protection if they so choose, but banks will have to contact the customer to explain their overdraft services, including the fees associated with the service.
The Center for Responsible Lending has found that overdraft fees have increased 35% in the last two years, and they estimate that 27 million Americans overdrew their checking account more than 5 times in a 12-month period, incurring fees that range from $10-$38 each time. I find these fees to be excessive and will support legislation before Congress that sheds light on overdraft protection policies, requires banks to allow customers to opt-in to overdraft programs and restricts deceptive fees.
Although we may not always agree, I respect your views and they help me to better represent you. I look forward to hearing from you in the future on this and other issues of importance to our community, our state, and our nation.
Member of Congress
Okay. My first problem is the cost that the “honorable” Mrs. Roybal-Allard went through to tell my wife to F*** herself. My wife, along with many others, sent an email to her representative. Said representative would have done better to email her response at a significant savings to the tax-payer she claims to represent. This would have saved on paper, ink, postage, and the time it took some secretary to write a form letter. I mean, this is the 21st century, and one could easily assume that everyone who sends email has access to receive email as well. STOP WASTING MY MONEY!
Now, anybody can look up Lucille Allard and find out that she is almost uniquely unqualified to be determining what happens between banks and their customers. Like many other political “representatives”, she’s never had a real job. Her life has been spent in Congress or government. But she did get a little pile of money from the American Bankers Association. Let me get this straight. There is nothing wrong with getting money from the ABA, but I’m not sure I could take money from an industry and claim to be objective when passing legislation connected to that industry. I’m pretty sure she can’t.
Now, on to the subject the legislation. Right now, people have a checking account, possibly a small savings account, and maybe even a line of credit attached to it for the expressed purpose of overdraft protection:
Checking account: $500.00
Savings account: $1,000.00
Overdraft LOC: $500.00
Now, let’s say that payday isn’t untill next week. Rent is due tomorrow. Rent is $750.00. Plus, you also have a car payment due tomorrow (Wow! Sucks to be you tomorrow!) in the amount of $300.00. Well, you could transfer some money from your Savings account into your Checking account. But what if you forget? Well, assuming your accounts are linked properly (which isn’t hard to do), the money will move from your Savings into your checking. Either way, you were covered, so far.
Checking account: $0.00
Savings account: $450.00
Overdraft LOC: $500.00
Now let’s say that something catastrophic happens. Your car breaks down and the bill to fix it is going to be $900.00. Now let’s up the ante a little. You find out that you need to buy a book for school, and school books being what they are, this book costs $75.00. Obviously you don’t have enough money (there are still a few days until payday). You wrote a check to the mechanic and asked him to hold it a few days, but who knows? So what do you do?
Right now, you go to the book store and swipe your card to get your book. You cross your fingers, hope your mechanic waited long enough, and get your book. If all works well, your paycheck will hit your account before both of the debits do. If not, guess what? The bank pays your book charge for you anyways! Of course, they charge you $20.00 for the convenience.
Under the rules as Mrs. Allard would want them, one of a couple of things would have happened. Let’s say your mechanic waited, but not quite long enough. Your book purchase comes through okay, but the check you wrote is now returned NSF (Non-sufficient Funds). You are charged a $20.00 fee anyway, and when you go to pick up your car, your mechanic won’t release it without payment. But since you bounced a check from him, you now have to go get cash. When you go to the ATM, you are limited to $500.00. The mechanic takes your $500.00 and tells you to bring the rest of the money along with his hefty storage fee.
The other option, your mechanic doesn’t wait, and when you try to get your book that you need for school you are declined. Unable to do the required work for the class, you jeopardize your grade.
The thing is, these overdraft protection programs have been out for quite a while now. Most everybody knows how they work, how to maximize them, and how to avoid paying as many fees as possible. They are only used (in most cases) as they were intended: As an emergency stopgap.
With the economy getting worse, and the likelihood of a lost generation on a larger scale than Japan’s lost decade getting greater, more and more people might need these products. Still as an emergency, but emergencies happen every day. The fact that the usage of these products has increased only tells us that they are needed.
When banks are forced to stop offering these services, and the consumer has no more access to them, will Mrs. Allard realize that she did exactly what the banks wanted her to do? “Oh sure, we’ll give you a line of credit, but the rate is going to be much higher because your credit sucks!” My guess is probably not. My guess and fear is that she, like other clueless, political whores (and I mean no disrespect to honest women and even men who sell sex for money or other valuables, nor do I mean to demean women in general) will simply move on to the next item on the list provided by her political contributors.
So, Mrs. Allard, again stop wasting my money. Realize that you were put in office to represent me, not to tell me to screw off. Right now you are in a safe district, but only because you and people like you have GERRYMANDERED the system and have dumbed down the voter. This is changing. I, and many more like me, plan to educate people in common sense, economics, and how to think for themselves. We eventually will put someone on the ballot who is courageous enough to stand up to you and your pimp Political Action Committees. Of course, you might also consider not pissing off experts in their fields (like my wife and myself) in favor of political contributors. You also might consider going out and getting a job in the real world where you have to make and stick to a budget and hope no emergencies come up that are beyond whatever jobs you and your husband have, as well as the salary for a retired Marine Corps officer.