WHAT HEELS: Banks Giveth, But Mostly Taketh Away
“As more Americans lose work, many are increasingly struggling to pay their credit card bills, forcing banks to do what they had been loath to do in the past: forgive some of the debt or modify it in the cardholders' favor,” reports The Washington Post:
Most card issuers are unwilling to talk about the practice for fear that they will be swamped with requests from people who do have the funds to pay their bills. But industry executives confirmed that the practice is becoming more common as card issuers face a record percentage of charge-offs, giving up on collecting debts that consumers never repay. The charge-off rate on U.S. cards for July was 10.52 percent of balances, according to Moody's, which expects it to reach at least 12 percent in the middle of next year. …
Consumer advocacy groups … have pointed out that credit card firms have increased interest rates and cut lines of credit in the past year in anticipation of a new law limiting their practices.
"The card companies are giving with one hand but taking away from the other," said Ed Mierzwinski, consumer program director for U.S. PIRG, a consumer advocacy group. "The problem is the credit card companies are treating consumers randomly. A small number are getting helped. A larger number are being hurt."
The New York Times describes another way banks are giving so they can take more from consumers:
Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances - for a price.
Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.
In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards.
But because consumers use debit cards far more often than credit cards, a cascade of fees can be set off quickly, often for people who are least able to afford it. Some banks further increase their revenue by manipulating the order of a customer’s transactions in a way that causes more of them to incur overdraft fees.
“Banks will let you overspend on your debit card in a way that is much, much more expensive than almost any credit card,” said Eric Halperin, director of the Washington office of the Center for Responsible Lending.
In their defense, bankers say it’s up to the customer to keep tabs on how much is in his or her account – though it’s the bank that decides when to clear checks and make the funds available for use. Banks also keep customers in the dark about the annualized cost of overdraft services since these charges are not considered loans.
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