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Via America’s Lawyer: Mollye Barrows, Legal Journalist for The Trial Lawyer Magazine, talks with Mike Papantonio about a new study that reveals how banks are pocketing about $11 billion a year in overdraft fees.
Transcript:
Mike Papantonio:
A new report from Pew Charitable Trusts says banks are pocketing about 11 billion dollars a year from collecting overdraft fees from American consumers. So is this fair business or another corporate scam? Joining me now to talk about this is Molly Barrows, legal journalist for the Trail Lawyer Magazine. Molly, it’s almost like we hear another story every week about the banks stealing money from consumers.
Mollye:
Yes.
Mike Papantonio:
And you’ve talked about the reason in the past, you said the reason they could do it is because we’ve done away with class actions of them being able to do anything about it, right?
Mollye:
That’s right. That’s exactly right.
Mike Papantonio:
So, how are these banks getting away with this?
Mollye:
Well this is something that started about 30 years ago. Apparently there was increased competition at the time, there was some technological advances, so they were seeing a decrease in revenue and overdraft fees which were hustled as a way of protecting consumers suddenly because this new revenue making option. So they would tell customers, hey, opt in for this overdraft protection and that way if you write a check and your paycheck hasn’t cleared just yet, we’re going to be there to cover that. But basically the result is high cost debt, so in some ways this is looking a lot like predatory lending and it’s really impacting a lot of consumers.
Over the past 30 years, their revenue has continued to grow as they’ve increased this overdraft practice and disguised it as a benefit for consumers.
Mike Papantonio:
Yeah and of course we see congress just within the last six months decided to do nothing.
Mollye:
Sure.
Mike Papantonio:
Zero about predatory lending and this is a type of predatory lending. Who is most impacted by this?
Mollye:
The very people that need protection the most, your economically and financially most vulnerable customers. What I thought was so interesting about this is according to the Consumer Financial Protection Bureau, less than one fifth of account holders are paying 90% of these overdraft fees. So they’re paying it every time they use their debit card, every time they use their ATM, because that population relies heavily and that’s on using those forms of financial transactions ATM and debit cards and yet that’s where so many of these fees are getting racked up. It’s hidden fees if you will, again going back to, hey, opt in for this practice and we’ll help protect you, but the bottom line is, they’re doing sneaky things like putting a hold on some of their finances. So even if they have enough money in their account to cover the transaction, they’re saying, no you don’t because we’ve got a hold on this and they’re being charged $35 in different ways.
Mike Papantonio:
Okay and just like the story that you’ve covered before, your position is the reason they get away with it is because individuals that get scammed, that get stolen from, if the bank steals $300 from them, it costs them $1,000 to take that person to court.
Mollye:
Yes.
Mike Papantonio:
To get the $300 back and then congress and the U.S. Supreme Court has now made it impossible to everybody collectively move forward in a class action against them.
Mollye:
Correct, so-
Mike Papantonio:
So in other words, the bank can say, well we can steal 10 billion dollars a year and get away with it because we’re doing it one person at a time and collectively they can’t do anything about it.
Mollye:
That’s exact right, so it’s giving more power and strength to the banks and less options for the little man to pursue recuperating any money and they’re getting run out of the banking institution. You’re talking about banks with assets of more than one billion dollars. In 2015, every bank interviewed that made more than a billion dollars, reported over 11 billion dollars in overdraft fees, all off the backs of basically people making $50,000 year or less.
Mike Papantonio:
Yeah.
Mollye:
In some cases, 25% of those people it was a week’s worth of pay going to overdraft fees. They simple can’t afford it.
Mike Papantonio:
Yeah, and so just to make, we’ve got about 30 seconds, but to make it really interesting, one court has already ruled that the Bank of America, that their overdraft fee scam, is the equivalent of predatory lending. They didn’t mince any words, they said, the Bank of America are predators in the way that they go after these people.
