Giant banks feasting on little people

[Dover]

Fee, fie, foe, fum...

Commentary: Giant banks feasting on little people

By Chris Pummer, CBS MarketWatch

SAN FRANCISCO (CBS.MW) -- In a California Senate hearing room, officials of Wells Fargo and Bank of America did their utmost to explain why their banks are picking the pockets of the poor...>>

The issue: How come two leading U.S. banks charge workers $5 to cash payroll checks drawn on their employers' accounts at the banks, when doing so violates a nearly 100-year-old state labor law? BofA and Wells are now facing class-action suits from employees and employers over the practice.

"They're basically requiring people to pay them to get paid," said Democratic state Sen. Dean Florez, who convened the special hearing March 30 on the banks' fees. "They've hit the lowest of the low. This is just morally bankrupt."

The dubious fee is the latest glaring example of how banks, brokerages and other financial-service firms are nickel-and-diming Americans of modest means in their relentless rush to boost "fee-based income."

As Consumer Reports notes in its May issue, fee income is a major profit center for the financial-services industry, as borne out by several first-quarter earnings reports. Banks once generated profits by lending out depositors' money. Now, they make them on huge markups on "services" provided to depositors....cont'd >

http://cbs.marketwatch.com/news/story.asp?siteid=google&dist=google&guid=%7B56FC7E1B%2D89E4%2D47D0%2D8539%2DB388EE4DABF7%7D

[gmoney]

1. Yeah, we had a bank as a client...

They weren't QUITE this bad, but the whole "free checking" thing is deliberately bait to attract the low-income/low-balance customer so they can stick them with bounced check fees, late fees, predatory interest, and other fees. This really started in earnest when the stock market tanked, and they had to recover money lost in the market.

Low income folks should REALLY consider a credit union... most are expressly non-profit, so usually have very low fees without a lot of hidden charges. For instance, mine, if I were to overdraft a check, simply transfers enough from savings to cover the check, and honors the check, with just a $5 fee for the service. (Most stores charge you $20 if you bounce a check, on top of the $30 your bank charges you.) My old bank used to send overdraft notices by snail mail, so by the time you actually received the notice, the store would present the check a second and third time, so the stupid overdrawn check for $15 that I forgot to write down in the register would end up costing $100+ for what is essentially a NON-service.

Thank God for deregulation that has made the banking industry more competitive! (NOT!)

[Kali]

2. and after

they collect that $100 a couple times ('cause its never just one bounce) they take your check card away as punishment instead of giving you a toaster or something as a reward for the 100's of dollars you just gave them.

Motto for my bank: "We MIGHT let you have your money"

[Robert Oak]

3. BoA outsources

Not only is a credit union a much better deal but they don't fire Americans and ship the jobs overseas plus they often support small business, etc. with loans in the local economy.

[Frodo]

4. They also

don't pay any taxes.

[jbutsz]

5. Bank One

...does this in Louisiana, charging $5 to cash a payroll check drawn on BANK ONE accounts.

They would not cash the checks otherwise, even after informing them that it's surely an illegal practice, but of course if someone is bringing in a check to cash they probably have to have the money right away, like me, and didn't have a choice.

It's disgusting how screwed we're all getting from every direction in this age.

[Robert Oak]

6. Also keep pushing bankruptcy law change

They keep trying to get the bankruptcy law changed so consumers
can't get credit card debt dismissed.

It's unbelievable, basically loan sharking and they spend millions
harassing people on the phone who cannot make the payments and they
work tirelessly trying to change Ch. 7 bankruptcy law so even if
an individual declares bankruptcy they still could not get out of the credit card debt.

[Frodo]

8. I'm OK with that one.

The bankrupcy laws do need to be tightened up. Not, perhaps, as far as you imply they are hoping for, but it is WAY to easy to get out of your obligations in most states.

My brother ran up a ton of debt shortly after college. More than one firm offered to help him out... none were giving him "debt counseling" or "budget education". They wanted to charge him a fee to make it all go away. Bankruptcy was "no big deal".

Yeah, banks don't deserve to make a profit off of bad lending decisions. But people don't deserve to spend the bank's depositors' money and never pay it back either.

[Frodo]

7. I'm still not sure that's legal.

It's called a "demand" account for a reason. The bank has an obligation to pay the check "on demand" (assuming certain conditions). I don't remember the UCC saying a fee could be charged.

Sure a bank has a right to charge a fee for services rendered, but I think they are missing the fact that the service being offered here is to the account holder, not the guy cashing the check.

[TO Kid]

9. They still use cheques?

I haven't been paid with paper since 1996 and don't know anyone else who gets cheques either- it's cheaper for the payor to use EFT.

[Frodo]

10. Often, but not always.

The break-even point for what size company benefits from that type of payroll is getting smaller and smaller, but it's still not for everyone.

You also have to consider your employees. It is sometimes the case that your average employee does not HAVE a checking account to receive that deposit. This is not unusual in the hispanic communities in several states - and not just "lower income" parts of the community. It's amazing how many clients we bring in with a hispanic outreach (sometimes just by showing them you respect and value them) who don't have an account at some other bank.