GENIUSES AT WORK – AT 8:53 A.M. ET:  The distinguished philosopher, Jerry Lewis, once remarked, "Bad looks you can change, stupid is forever."

And so it is.  And once again we see that some of our "major executives," the keepers of capitalism, are doing their very best to advance the prospects for socialism in the United States.  Is there any limit to the buffoonery of some "bankers" who seem constantly to be holding a sign up to the American people saying "'Regulate me before I bank again"? 

The dumbness this time is the attempt to trick people into messing up their accounts so severe penalty fees can be charged, fees that have brought in billions to the banks.  Maybe an alternative, like intelligent, service-oriented banking that satisfies customers, might be a better choice.  Y'think? 

From The New York Times:

As the government cracks down on the way banks charge fees for overspending on debit cards, the industry is mounting an aggressive campaign aimed at keeping billions of dollars in penalty income flowing into its coffers. Chase and other banks are preparing a full-court marketing blitz, which is likely to include filling mailboxes with various aggressive and persuasive letters, calling account holders directly, and sending a steady stream of e-mail to urge consumers to keep their overdraft service turned on.

So many people now dip their balance below zero that banks generated an estimated $20 billion from overdraft fees on debit purchases and A.T.M. transactions in 2009, according to Michael Moebs, an economist who advises banks and credit unions. All of this revenue is potentially at risk, since these are the two areas that the new Federal Reserve regulations cover. (Banks generate an extra $12 billion by covering checks and recurring bills; under the new rules, they can still cover those and charge fees without customers’ consent.)

And...

Given the billions at stake, consultants are urging banks and credit unions to hire them to help. “Your fee income will take a substantial ‘hit’ if you don’t start getting consumers to ‘opt-in’ for POS/ATM overdrafts NOW!” Mike Sobba, president of Strunk & Associates, a financial institution advisory service, warned banks in a pitch on the company’s Web site.

Some are even lobbying banks to focus their pitch on the minority of customers who are responsible for the vast majority of overdraft fees. According to a Federal Deposit Insurance Corporation study in 2008, 93 percent of overdraft fees come from the 14 percent of people who exceed their balances five times or more in a year.

Nice, huh?  Your friendly, neighborhood banker. 

Amid a growing public outcry over these fees, several large banks announced changes to their overdraft policies last year. Bank of America said it would not charge a fee when customers exceeded their balance by $10 or less per day and would limit overdraft fees to four per day. At the end of March, Chase is eliminating overdrafts for customers whose accounts are overdrawn by $5 or less and has already limited overdrafts to three per day.

But even with those changes, customers could still incur more than $100 in fees a day if they opt to take overdraft coverage.

At least one credit union is using the new Fed rules to try to differentiate itself from its competitors. On its Web site, the UW Credit Union in Madison, Wis., says, “While we expect some financial institutions may aggressively market the idea of a consumer ‘opt in’ within the boundaries of this regulation, we have no such plans.”

COMMENT:  When banks make their money from penalty fees, there is something wrong with the banking system.  Banks are becoming increasingly unpopular with consumers, and dramatically so.  You've all seen the commercials on television depicting a banker trying to cheat little kids.  (It's the commercials in which a little girl tries to ride a bike outside a predetermined small box, and another child is tricked out of a pony.)  The commercials are run by a bank that claims it doesn't indulge in such practices. 

Some creative banking, please.  Let's get back to basics.

February 23, 2010