[boling11]

Bank overdraft and NSF fees are definitely odious. It's part of the reason why so many poor people have switched over to prepaid and are opting to pay the $5-$10 monthly fee for those accounts - it comes out to less for many people and at least it's predictable.

These types of fees have been especially egregious in recent years, because the bigger banks have had their traditional revenue sources drastically capped/reduced (interchange & interest spread).

[fredkbloggs]

> These types of fees have been especially egregious in recent years, because the bigger banks have had their traditional revenue sources drastically capped/reduced (interchange & interest spread).

Maybe the lesson is that over-regulation and financial repression aren't so good for the people. These guys are going to make money somehow. You can create a system that allows them to do so with minimal harm while providing valuable services or you can take away every stream of revenue except the evil things they haven't thought up yet. America is clearly opting for plan B, and it's working about as well as you'd expect.

[rev_bird]

This seems like a politically motivated conclusion -- I just can't find any evidence that it's necessarily true.

I really can't see how "over-regulation" is the cause of banks behaving badly -- their core business is ostensibly to charge interest, right? That's still legal and, in the US at least, loans (for school, homes, etc.) are an almost celebrated social rite of passage.

I just can't look at banks knowingly screwing their customers and react with "they need less rules." If anything, this behavior is evidence that banks cannot be trusted to act in the public interest, if only because there are much more substantial financial incentives to act like assholes. Regulation is in place because it's absurd to just say, "oh, they'll be nice, why would anyone be mean to people in exchange for huge sums of money?" It fills in the moral gaps that the market doesn't enforce.

[fredkbloggs]

It's pretty obvious that banks do not act in the public interest. I'm not sure why anyone would expect them to. They are for-profit corporations and they will do everything within the law to increase those profits.

The US regulatory strategy with respect to banking is to limit the interest they can charge (often to a level below break-even), limit the set of customers to whom they can make loans, limit the terms on which loans can be made, require them to do business with a particular central bank that does not pay interest, require them to hold a certain amount of capital in forms that you dictate, prohibit them from charging fee A, then when they start charging fee B (legally) instead, prohibit that too.

Under the circumstances, I don't see why anyone should be surprised or upset that they then stop charging fee B and start charging fee C instead.

If you want the government to do something that would actually help people, you should be looking at all the laws that effectively prohibit the use of cash. Or the laws that in many states require doing business (with fees!) with a bank in order to get paid, or to take advantage of public assistance programs. Start by accepting that banks are not charities; they are never going to act the way you would like. What you can do is to give people good options that don't involve banks at all, then let the market sort it out. When you force people into banks, you're setting yourself up for disappointment. You will never be able to regulate away every last way to make a profit, and if you did manage to do so then you would rapidly find yourself without the ability to conduct any transaction -- because you've legislated everything into the banking system (where you can watch it and dictate to everyone in world). It just doesn't work.

[rev_bird]

That's an interesting angle that I hadn't considered -- I get that it's unreasonable to ask banks to be a public trust AND a public corporation at the same time, but maybe separating the "for-profit business" side of things from the "financial services necessary to just be alive" side would be more productive for everyone. Just never occurred to me, for whatever reason.

Thinking more about it, this seems like a similar problem to one some states are running into with privatized prisons and "public" schools -- corporations are put in charge of public services and are doing a horrifying job in some cases, because their business is oriented toward profit, not "the public good." I'm not saying the companies are acting unreasonably, but maybe some things should just be set aside for something other than profit... firefighters come to mind.