Wow, Bank of America is getting rid of its overdraft fees on debit cards. This is how little I trust commercial banks: I’m sure there’s a rub. I’m sure they’ve found a secret, special way to screw customers that live paycheck to paycheck, and this is all just a P.R. campaign to obscure that. But maybe not. Maybe this is how they’re going to be competitive. Instead of overdrafting your account when you use your debit card and don’t have money, the plan is to have your card denied, which the vast majority of people would prefer, I’m sure. If this is what it purports to be, then it’s such great news. Overdraft fees are a pernicious form of usury, a real human rights abuse. G.D. explains:
In practice, though, many banks enroll their customers in the programs without telling them and assess charges to customers’ accounts out of sequence in order to force them into overdrafting their account…..
But the proliferation of banks in poor neighborhoods has done little to keep the unbanked from opting for “fringe banking services” — check cashing services, payday lenders, and the like. Those institutions charge onerous fees of their own, but unlike the big banks, their fees are explicitly outlined. Customers may cough up $12 for the privilege of cashing a $300 check, but it makes more economic sense than being stuck with miscellaneous surcharges over the course of several weeks for not maintaining a minimum balance, withdrawing money from an ATM, writing a check, or overdrafting your account — penalties that can accrue much more easily and be much more disastrous when your life is inherently unstable.
However predatory and exploitative you may think the banks are towards the working poor, I promise you that they are much worse than you can imagine. How do I know? Well, I used to work at a bank. For the first couple of years I worked at a bank, I had a fairly laid-back, easy existence. I had a good life working at a branch that served downtown Austin, and I worked mainly with business customers, the people from the bars and restaurants that came in and out all the time because they were moving a lot of cash. But then I got promoted to manager and moved to a smaller branch in a wealthy neighborhood. That didn’t worry me overmuch, though. Working with wealthy customers can be a headache, since they’re so entitled, but at least your customers are making money off the bank and are by and large happy about that.
What I didn’t realize when I signed up for the job was that I was also inheriting a mini-branch in the mall. And even though that branch was small and not even really full service, it immediately became the source of 90% of my headaches. What’s not fun in commercial banking is having paycheck-cashing being a huge part of your foot traffic. How it works is this: banks don’t cash checks for non-customers, unless the check is drawn on that bank. Then they have to. A lot of people who don’t have bank accounts would far prefer to get their checks cashed at the banks, where the fees are usually a lot smaller than those horrible check cashing places. But the bank management hates these folks, because they don’t make any real money off them, besides the relatively small $3-$5 check cashing fees. So they make it hellish to cash your paycheck at a bank. The ostensible reason is “security”, but it doesn’t take even the dimmest teller but a week to figure out how little sense that makes. (Checks drawn off other banks are riskier to cash, because they aren’t funds verified. The losses from fraudulent checks aren’t nothing, but are better and more efficiently handled by training tellers to spot frauds instead of putting the customers through some of the security theater they subject them to.) They had to present one or two forms of ID and put a thumbprint on the check, and since everyone tends to cash their checks when they get them, this level of ID requirements plus the crowds makes the lines unbelievably long. The people who suffer the most are the poor tellers, cashing one check after another for people who are crabby because they’ve been working all day and this long ass line is the only thing between them and having their cash.
All of this was really bad in a mall, where all the stores would have an account at our branch so their employees could march straight off work on Fridays and cash their paychecks before going out for the weekend. So having these overworked tellers on my plate wasn’t fun, but it was manageable. But then things got really ugly, when they changed the district that my branch was in, which meant that I had new management. Management that was less interested in keeping the wealthy customers that I had signed up to help happy, and way more interested in the earning potential they saw in the working poor who constituted most of the foot traffic in the mall branch.
I was immediately instructed to put most of my time and effort into converting paycheck cashers into account holders. I resisted. As I saw it, these people weren’t fucking stupid. If they wanted a free checking account, they could have one. There were signs everywhere helpfully explaining that it was free if you had $100 to open it with. If they wanted to cash their checks and live off cash only, then they had their reasons. And they were good reasons! The worst parts of my job were 75% due to people who kept average account balances below $500. Those were the people who overdrew their checking accounts all the time, and then came in sobbing and begging for relief from what was often hundreds of dollars in overdraft fees. To make it worse, the bank’s official policy (this is standard) was to clear debits from highest to lowest amount. In other words, if processing had a rent check of $400 and then fifteen debit card transactions of $5-$10, they took the $400 first, and then the rest. So if the $400 overdrew the account, then every single transaction after was an overdraft fee.
I may not seem like it, but I’m a human being and having someone suffering from this injustice in front of me—-a regular part of my job—-was enough to suck the life out of me, over and over again. There’s some things you can do to help, but you have to be careful to fly under the radar, or your own job will be on the line.
So when my managers wanted me to recruit all these paycheck cashers as account holders, I went into shut down mode. It was straight up exploitation of the working poor, an attempt to get people who don’t have a lot of experience with banks to create accounts they’ll immediately overdraw. From the bank’s perspective, it’s pure profit. Either the customers pay you for all the fees or, more commonly, you end up shutting down the account and selling it to a collection agency (I think for pennies on the dollar, though I’m not sure), who then tries to recoup their investment through harassment and ruining your credit rating. From my perspective, this was a human rights violation that I didn’t want to be party to. They went around me, holding training sessions with my tellers to explain how to present a hard sell. (A big part of it was using the existence of the long lines and multiple ID requirements to sell them, pointing out that this all goes away if you deposit a check instead of cashing it.) Then they decided to get rid of me, first by hiring someone for a redundant position, and then watching me like hawks to see if I screwed up anything, no matter how minor, and then use that as an excuse to fire me. So I quit.
I think/hope this goes a long way to explaining how deeply cynical I am that the financial industry has an ethical bone in its collective body. The minimum wage service employees of the world may seem like human beings trying to get by the best they can to you or me, but to them, they’re marks. Banks are vampires, and they see the working poor—-and increasingly the middle class—-as nothing but sacks of blood to be drained dry and thrown aside. They don’t care if their accounting practices ruin you so badly that you lose your apartment and then your job because you have trouble getting to work now that you’re homeless. They see people coming into the bank cashing $250 paychecks and they see nothing but the huge numbers of overdraft fees they could be racking up on that person, instead of the measly $3 check cashing fee. And by god, they’re going to get it.
Maybe someone at Bank of America is afraid of hell. I don’t know.
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Thanks for the insight into banking practices. I’ve used credit unions for more than 30 years now, since my local bank pulled that overdraft trick on me. The day I went in to close my account, I found myself in a whole line of people doing the same thing for the same reason—apparently the bank had decided to drive off small depositors. CUs aren’t perfect, and I keep expecting them to start picking up bad habits from the commercial banks, but I often wonder why nonrich people do any business with commercial banks.