[stevewepay]

This is a quote from Michael Lewis' The Big Short, I'll never forget it:

Obsessing over Household [Finance Corporation], he attended a lunch organized by a big Wall Street firm. The guest speaker was Herb Sandler, the CEO of a giant savings and loan called Golden West Financial Corporation. “Someone asked him if he believed in the free checking model,” recalls Eisman. “And he said, ‘Turn off your tape recorders.’ Everyone turned off their tape recorders. And he explained that they avoided free checking because it was really a tax on poor people — in the form of fines for overdrawing their checking accounts. And that banks that used it were really just banking on being able to rip off poor people even more than they could if they charged them for their checks.”

Eisman asked, “Are any regulators interested in this?”

“No,” said Sandler.

“That’s when I decided the system was really, ‘Fuck the poor.’”

[Touche]

> form of fines for overdrawing their checking accounts.

Why in the world shouldn't you be fined for overdrawing your checking account? A checking account is not a loan, am I wrong in thinking this quote is B.S.?

[hrehhf]

Because the bank should just deny the charge to the account instead, and have no fine. You are right that a checking account is not a loan--so the bank should not treat it as if it is!

[scintill76]

I'm not really in the know, but I'd guess "back in the day" it legitimately cost somebody something to deal with a cheque with a value greater than the balance of the account. Nowadays, it should be the same $0.0001 worth of computing/networking power which is already spent if it's a good cheque. I'd welcome corrections from someone who knows more, but I figure modern fees are just a way for the bank to extract money from people too harried to fight back. Perhaps some of it is legitimately used to subsidize general account maintenance, and maybe the banks are passing on a real cost specifically charged by a clearinghouse for bad debits -- but somewhere down the line, the bulk of it has to be lining someone's pocket.

If someone were attempting thousands of bad charges in a month, maybe they "deserve punishment" for abusing the system. What the fees do now is just taking money from people who already have little, and/or just lost track of their balance and made a small mistake that would have no bearing on anyone else if the bank didn't fine for it.

[selectodude]

The charge should be declined, no different than a credit card. Allowing it to go through and then charging usurious fees is wrong.

[Touche]

Fine, say it's wrong. Don't say it's a "tax". You have no choice with regard to taxes; you have a choice to not overdraw your account.

[Steltek]

Exactly what kind of choice is it if banks aggressively pursue strategies to make it impossible to determine if you have sufficient funds in your account? "You have a choice to go through Door A or Door B. One door will brutally kill you, the other has pizza and ice cream." There! Aren't you happy? You have a choice!

[themartorana]

What is the purpose of being so overly pedantic? It's all over this thread.

"A rose by any other name would smell as sweet..."

[Touche]

Because the distinction between being a victim and being a willful participant in a malevolent scheme is an important one. Recognizing that makes it easier to diagnose why things aren't as ideal as we wish they were.

[geofft]

What is the purpose of a fine? Before we discuss further why one shouldn't be fined, can we make sure we agree on why one should?

Off the top of my head, I see "dissuading behavior that negatively impacts the bank", and that doesn't seem to justify a fine in this case, but maybe you're thinking of a rationale for a fine that I and maybe others are not thinking of.

[Touche]

> Off the top of my head, I see "dissuading behavior that negatively impacts the bank", and that doesn't seem to justify a fine in this case, but maybe you're thinking of a rationale for a fine that I and maybe others are not thinking of.

Great! Someone that wants to participate in reason and not just boisterous proclamations. I'm down.

So yeah, I agree with your definition and it applies in this case because the bank is negatively affected by having to shift money from other accounts to cover your overdraw.

[geofft]

So a couple of things:

1. Why can't the bank refuse to process the charge?

2. This seems to be failing, in practice, at dissuading people and making them pay attention to keep a positive balance. At least according to a couple of comments here, there are people who are repeatedly hit by overdraft fees. Is there something better that can be done do solve the actual problem, which is banks having to come up with money to cover these tiny loans?

3. Is there a more proactive way to solve this, such as notifying people (phone, text, push notification, whatever) that their balance is low and they have a recurring charge coming up? Wouldn't that be better for the bank, so that the problem wouldn't happen in the first place?

[Touche]

Oh, you're under the illusion that a for-profit business' primary responsibility is to maximize the value they provide to their customers? Sorry but that's not the way the world works. Now that could possibly be the case if we lived in a country where banks were allowed to compete on things like "treating the customer right" but we don't live in such a country; we live in the one where ever more annoying fees is the only game in town.

But none of this is relevant from your (and my) point of view; ours is really simple. We're completely aware of the murky rules that apply when your account gets close to $0 and the best solution is to not use the account in that case.

[geofft]

No, I believe nothing of the sort and now I'm curious what part of my post conveyed that, so I can write in a less sloppy manner in the future. Sorry!

Judging solely from the point of view of the bank, and conditioned on the assumption that fees are to dissuade customers from behavior that hurts the bank, it's in the bank's interest:

1. To find a way for that behavior not to hurt it in the first place.

2. To actually, successfully dissuade behavior, so that the bank is hurt less.

3. To warn people right when they're about to hurt the bank, so they don't.

That matches the three questions I had.

If fees are themselves for the bank's profit, then yes, sure. But then we can just admit that the bank is charging fees to people who maintain low balances (= "poor people", to first order) for profit purposes, right? That seems clearly within the margin of rhetoric that "tax on poor people" is a fine description.

[Ollinson]

Why not just deny the transaction if it can't be paid in full?

The bank isn't doing you any favors by letting you pay with money you don't have, they know they'll be getting that money back and then some.

[bedhead]

No, it's the same system that allows the lottery to exist. It's not "fuck the poor", it's "fuck the stupid" (alternatively, "fuck the bad-at-math"). If there's a high correlation, I don't think anyone is going to be terribly surprised, as uncomfortable as that may be.

I have been poor. I have also been the opposite. I have also been a bank employee, and a professional investor who studied security analysis by looking at banks. The feds have rightly come down on banks via recent regs about how to charge overdraft fees, because banks did in fact used to play bullshit games with how they charged fees. A lot of that has been fixed. But the uncomfortable truth is that the people who repeatedly fall victim to these fees these days are simply irresponsible. You might as well complain about the high price of parking/speeding tickets - every opportunity in the world is there to avoid it.

I'm sure this will get about 50 downvotes but whatever.

[danharaj]

There is a cognitive overhead to managing every predatory relationship. The poor have to deal with many, many predatory relationships all the fucking time. People make mistakes and extremely powerful people and institutions exploit them as much as they can when they do.

Good on you for being able to say that you were poor, in the past tense. I'm glad. I don't think people are stupid just because they stay poor. When you call people stupid because they suffer and can't catch their breath or get their affairs in order because human institutions are structured in the most hostile, alienating, predatory way they can get away with, you start seeing stupidity wherever you ought to see compassion and empathy.

[bedhead]

You're right that the poor face many asymmetric relationships day-in and day-out. Whether I would describe it all as "predatory" I would disagree.

Again, I think this is a very, very uncomfortable topic to have an honest conversation about, but I think people often mix up causation and correlation on this general topic. Let's stop kidding ourselves about it - many, many poor people are poor because they lack the basic building blocks for success that we take for granted: god-given intelligence, a strong work ethic, long-term thinking, careful considering for non-trivial decisions, an upbringing that values education, etc. I'm NOT saying all, but definitely many. So to the extent people and organizations are trying to in some way take advantage of "poor" people, this isn't really accurate - they are trying to take advantage of people who don't make good decisions. Heck, if you were trying to sucker someone for money, wouldn't you (ignoring everything else) go after someone with lots of money? People can't "catch their breath" or "get their affairs in order" not because of systemic oppression, but because they simply don't have the basic life skills to do it in the first place...that's probably a large part of why they're poor. There's also just a lot of inertia with this stuff, but we're getting way off topic. I read an interesting book about this years ago called The Persistence of Poverty, which I would recommend.

None of this is to say I am not empathetic or have any compassion. The blatantly predatory behaviors are deplorable and should be stopped and if applicable, the people involved should face whatever punishment is allowable. But adults need to be treated like adults at some point.

[fideloper]

Sounds like victim blaming. To an extent you're right, but the situation is not at all this black and white (like anything in reality).

Take for example just the fact that it's easy to lose track of your current savings especially without ready access to the internet, a common situation for the low income.

[bedhead]

Yes, it's is 100% victim blaming, because for god's sake, at what point do we expect grown adults to take some friggin responsibility for themselves?? Puh-lease, spare me the "easy to lose track" garbage. It's never been easier to keep track of one's finances, and that's before even considering an internet connection. If your budget is that tight, maybe, just maybe, actually closely tracking your bank account should be a priority, no??? One would think. God knows that's how I was when I had almost nothing to my name.

I don't like the banks playing games with this stuff and I'm glad most (but not all) of their bs got stopped. But my god, when are we going to hold adults accountable for just basic life skills instead of insulting and coddling them? Ever??

[thaumaturgy]

You're obnoxious, but you're right. I've suffered more than my fair share of overdraft fees, and every one of them was my own fault. It didn't help that my bank's online banking system was a filthy liar with a long-standing bug that caused it to display an incorrect balance (for up to a day or more) when there was an incoming transaction that wasn't pre-auth or posted -- but ultimately that just meant that I had to start writing down all of my charges and deposits, so that's what I did.

Overdraft fees are onerous, banks absolutely do exploit their poorer customers for extra revenue, several of the larger banks are next in line for most-hated organizations in America behind AT&T and Comcast, and the structure of fees across a wide array of services are all biased against the poor. But, none of that changes the truth that most overdraft fees could be avoided if the poor were more diligent about their finances.

[magicalist]

Oh please. Everyone should be more diligent about their finances. The difference is that someone with money says "oh damn it, I spent too much. I should buy less stuff next week" and someone without much money gets an overdraft fee.

Maybe the problem with the current system isn't poor people, the problem is just people. It's just that some people don't have any sort of margin of error, so we shouldn't tilt the scales against them too. No need to add to the shit situation they're already in.

[thaumaturgy]

Fantastic, I agree with everything you said and you didn't disagree with anything I said.

[guelo]

Except that banks go through great lengths to make keeping track of your money as confusing as possible.

[bedhead]

Examples? Again, as a former bank employee and someone who's analyzed banks for well over a decade, I know with certainty that you are 100% wrong...but I'm interested in your explanation.