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Challenge the Bank is about Fighting Back!

 New research from Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL) reveals the startling extent to which Banks have adopted overdraft loan services, and the vast sums this costs consumers.

1. Penalty fees for NSF and overdrafts are a huge and growing expense for bank customers.

Consumers pay at least $10 billion per year, sometimes as much as $22.7 billion, just for overdraft loans, according to CRL’s estimates based on analysts’ assumptions and reported checking account service fee revenue. According to Mike Moebs of Moebs Services, total consumer costs for NSF and overdraft fees was $33 billion alone in 2003. You as a consumer are paying a hefty part of banks’ expenses with these fees: CFA has found that over a fourth of big banks cite overdraft fees as a source of important “revenue.”

2. The biggest banks charge the highest fees for NSF and overdraft transactions.

You’d think the smaller banks, with less “wiggle room,” would charge the highest fees for overdrafts and other expensive “services”...but you’d be wrong. Banks in the CFA survey charged an average of $28.57 for overdrafts and $28.09 for NSF transactions—and in many cases, the bigger the bank, the higher the charge. Six big banks in CFA’s survey charge more for paying an overdraft than for bouncing a check. Nearly half of the big banks also charge sustained overdraft fees—some as high as $27.50 per incident.

3.  Big banks are, in effect, therefore making overdraft “loans.”

CFA’s survey of banks holding over half of all consumer deposit accounts found that over 80% of banks effectively make overdraft “loans” by permitting consumers to overdraw at the ATM. Almost as many banks permit overdrafts at point of sale, and over half permit consumers to overdraw to pay pre-authorized debits. These “courtesy overdrafts,” once again, aren’t limited to small banks alone. Big banks are starting to advertise their willingness to let consumers overdraw at the ATM—for yet more penalty fees. For example, Bank of America charges $25 when its customers withdraw more than they have on deposit at the ATM.

4. Banks use debit processing order to maximize revenue from bounced checks.

Ever wonder why, when you have five or six small checks and one big one, the bank doesn’t pay the five or six small ones first with the money available? That’s by design, and it’s a revenue generator for the bank. Thirty-three percent of big banks disclose that they use high-to-low debit clearing; then, when the largest check processed causes other transactions to bounce, the bank collects more overdraft fees. Another 15% disclose that they “generally” clear high-to-low, while only 24% reserve the right to use any debit clearing order. How do banks rationalize this? By claiming the process “serves” consumers, who want their largest and most important transactions paid. Banks that routinely pay overdrafts, however, cannot use that justification. Challenge the Bank believes that banks that provide overdraft “bounce” loans, while at the same time using processing order to enhance overdrafts, are using unfair practices to enhance revenue at the expense of their customers.

5. Outdated check hold time periods contribute to increased risk of overdraft.

Remember the introduction of “Check 21” in 2005, and its warnings to consumers that they would no longer be able to “float” checks from their accounts? Check 21 speeds up the time between when you write the check and when the funds leave your account. But Check 21 doesn’t work both ways! While your “outgo” has sped up, banks still place holds on uncollected funds of between 3 to 10 days—or more. This means that the “deposit” you have in the bank to cover your checks...won’t cover it in time. Current laws and regulations, once more, work purely in the banks’ favor: the bank can withhold access to your own money at the same time they draw on those uncollected funds...and charge you the overdraft fees that result, a new revenue source that has impacted increasing numbers of consumers with depressing regularity.

What do consumer banking analysts recommend to Federal Bank Regulators?

1. That the Federal Reserve Board close the Truth in Lending Reg Z loophole used by banks to make cash advances to consumers without providing TILA protections and comparable cost disclosures to consumers. Besides requiring that overdraft loan costs be disclosed under open-end credit rules, this action would require banks to get consumers’ affirmative consent to extend credit.

2. That the Federal Reserve Board direct banks to examine their check hold policies to ensure that the full check hold time period is not used except in instances where it is in fact required to avoid significant risk of an insufficient funds check. This alone would remove a great many excessive “holds.”

State that it is an unfair trade practice to charge overdraft or bounce-protection fees on any check which would not have bounced if a hold period had been completed on a timely deposit, or where a deposit was made sufficient to cover the check, if funds for that deposit have in fact been received. If the reason for the NSF status is that a formal “hold period” has not yet expired on the deposited funds—but the funds are in fact available to the bank—this is grossly unfair business practice and needs correcting now.

That the FDIC require financial institutions separately 

report checking account fee revenue for insufficient funds and for overdrafts. Because this separate reporting of overdraft and NSF fees is not presently required, policymakers do not have a firm figure for the size of this growing credit segment, and excessive consumer penalties are “flying under the radar.”

That bank regulators bring Federal Trade Commission Act 

cases against banks that order debit processing to maximize fee revenue while routinely covering overdrafts for their account holders. Bank regulators should also bring deceptive practices cases against banks that claim their “courtesy bounce protection” is discretionary while also advertising, representing or implying that consumers can expect the bank to cover overdrafts, or while permitting consumers to overdraw at the ATM, POS, or through pre-authorized debits. Banks should be prohibited from advertising or promoting unsafe banking practices by consumers.

THE LAW -what politicians don't want you to know! 

The first thing you need to know, You have a right to avoid—that extortion known as “usury.”

 “Usury” is a word you might not hear that much, so let’s simplify things and just say...

You have a right not to pay excessive interest in any financial transaction.

 In the United States, usury laws are state laws that specify the maximum legal interest rate at which loans can be made. However...

Each U.S. state has its own statute which dictates how much interest can be charged before the interest is considered “usurious” or unlawful.

Should a lender charge above the lawful interest rate, a court will not allow the lender to sue to recover the debt based on the illegality of the interest. In some states (such as New York), such loans are actually voided!

Sounds good, doesn’t it?  Well, not so fast.. The U.S. Supreme Court held unanimously in the 1978 Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp. case that the National Banking Act of 1863 allowed nationally-chartered banks to charge the legal rate of interest in their state, regardless of the borrower’s state of residence.[19]  That means if you live in a state where the legal interest rate is, say, 11.5%, but you borrow—or have credit that originates—in Oregon, you’ll pay Oregon’s interest rate...not your state’s.

In 1980, due to inflation, Congress passed the Depository Institutions Deregulation and Monetary Control Act, which exempted federally chartered savings banks, installment plan sellers, and chartered loan companies from state usury limits. And, yes, this did exactly what it sounds like it did: it effectively overrode all state and local usury laws.[20][21]

Think you have some refuge in Truth and Lending law? Yes and no. The 1968 Truth in Lending Act does not regulate rates—except in the cases of some mortgages—but  it does require uniform or standardized disclosure of costs and charge.

Further, although it arguably has the power to do so under the interstate commerce clause of Article I of the Constitution, Congress has opted not to regulate interest rates on purely private transactions. Congress has opted to put a federal criminal limit on interest rates by the RICO definitions of “unlawful debt.” These limitations make it a federal felony to lend money at an interest rate more than two times the local state usury rate and then try to collect that “unlawful debt.” [17]

If you’ve been following so far, your question then has to be....

If Congress states it is a federal felony to lend money at an interest rate more than two times the local state usury rate, why then are banks be exempt from state usury limits?  Because of that Congressional loophole...that Congress does not regulate interest rates on private transactions.

Seem like a great big loophole to you? It does to us, too.

We believe that the regulations, as they presently stand, allow for huge abuses of usury laws—abuses because you’re “out of state,” abuses because you engage in a “private transaction,” abuses because you deal with a federally chartered institution. We further believe—because we see it in action!—that banks regularly assess charges that amount to usury...legally.

Banks are presently not accountable for making public the amounts of sheer profit they make from various “fees”—be they service fees, interest, NSF fees, overdraft-protection fees, “bounce-protection” fees. Nor will they share this information without being forced to—because if that information is available to consumers and to regulatory agencies, banks know they will be liable under usury laws for huge amounts of excessive charges.

Challenge the Bank intend to help you to stop it! 

• Join us now, find out what your rights are, become educated, share your information, and discover how to be treated fairly in the marketplace:

• Cut out lawyers and have documents written in straightforward, “real person” language...

• Have your bank be accountable for money it charges you for any purpose, no matter how what may actually be “interest” is disguised by “fee” terminology....

• Have full information on, and approval of, any open-ended credit arrangements prior to their enactment...

• Have protection from arbitrary, excessive fee assessments...

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