COMMENTARY: More Government Control To Tell People They Are Not Responsible For Their Financial Decisions

 Another Cup Of Coffee News

More Government Control To Tell People they Are Not Responsible For Their Financial Decisions

By Dannie McIntire

September 14, 2022

Another tranquil morning in southern Indiana, at least until I read a news item on bank overdraft fees, a cup of coffee in hand, it’s for me to calmly rant.

The House of Representatives “Committee on Financial Services” had advanced a potential bill to the full house that will prevent financial institutions from charging too many overdraft fees to their customers.

The “Overdraft Protection Act”, proudly written by Rep/ Carolyn, D-N.Y.; in response to overdraft fees becoming more prevalent with the rise of the number of people using debit cards.

I will quote a section of the proposed bill, “It is the purpose of this Act to protect consumers by limiting abusive overdraft coverage fees and practices, and by providing meaningful disclosures and consumer choice in connection with overdraft coverage fees”.

Now I admit I was not up to par on the issue of financial institutions and their rules and fees associated with overdraft protection until I did a little research on the subject. 

I remember quite a few years ago when I switched banks being asked if I wanted overdraft protection on my checking account, which I declined. I saw no reason then, or now, why such a service would be necessary.

I guess I’m “old school”, I log online into my bank accounts at least daily, I know my balances, so for me, it’s puzzling why such a service would be needed. If I don’t have sufficient funds in my account, then why would I write a check or do a debit for an amount exceeding my balance, knowing that I’m going to get hit was an overdraft fee?

Apparently, for various reasons, many people make daily transactions with their checking or debit cards using money they don’t have and incur such overdraft fees. 

In 2020, customers of financial institutions were charged $12.4 billion dollars in overdraft-related fees.

To me, one discerning thing about overdraft fees are that they tend to hurt those who can least afford it; those with lower incomes. They may find themselves in a financial situation where to pay a bill or to purchase a required necessity they utilize overdrafts, which basically become a short-term loan with a high-interest rate payback.

However, my other point of view is that banks are a business; they have to make a profit for their shareholders to remain in business. “Profit” is not a dirty word. 

Banks are not the federal government, having free money to hand out and continue to operate on a deficient.  

Research conducted by “The Consumer Financial Protection Bureau”, a U.S. government agency, found that people who pay more than ten overdraft fees per year end up paying almost three-quarters of all overdraft fees.

In simple terms, the above group basically utilizes overdraft protection offered by their bank as a source of short-term loans.

“Loan” is the key word. You take out a loan, and you pay it back according to the terms of the bank you agreed to when you signed up for their overdraft service.

I personally believe the proposed “Overdraft Protection Act” is a bad idea. As a bank customer, when you sign up for their overdraft service, you agree to their rules and fees. How many people do not bother to “read before you sign”? 

Much like the current issue of forgiving student debt, our government is fostering the mindset that you shouldn’t have to be responsible for your personal financial decisions; “because it’s not your fault”. 

Just a thought, our secondary education systems should include required courses on financial planning and financial responsibility; I fear too many young adults are entering adulthood without the proper tools to help them make wise money decisions.

FOOTNOTE:  This article was posted by the City-County Observer without bias or editing.