Shredded Security

View this document (PDF)

Read the executive summary (pdf) >>

Unfair bank practices threaten to shred the safety net of Social Security for older Americans

As AARP reports this week that bankruptcy among older Americans has doubled since 1991, and as banks raise their overdraft fees and make it easier to hit their account holders with multiple charges, we release findings on how unauthorized overdrafts strip fees from Americans 55 and older at the level of $4.5 billion per year. Nearly $1 billion of that comes from people who are heavily dependent on Social Security income.

CRL’s June 18, 2008 report also finds that debit cards are the most frequent trigger for overdrafts even for people 55 and older – these debit card overdrafts are both extremely costly and easy to prevent if the banks were interested in discouraging them. On the contrary, bank practices intentionally maximize overdrafts by automatically approving these debit purchases and changing the order they subtract transactions in their daily account balancing, debiting the highest dollar amount first and artificially increasing the number of $34 fees they can charge.

In new proposed rules, the Federal Reserve Board has acknowledged that banks are using unfair overdraft practices. But their solution doesn’t go far enough.

New rules would not require banks to obtain consent from customers before enrolling them in their most expensive option for covering overdrafts, but would only allow them to opt out of the program after the fact.  Consumers should not have to “unsubscribe” from this costly system.

Listen to report author Leslie Parrish, a Senior Researcher with Center for Responsible Lending as she describes the report and its findings.

Read the press release.

Published: June 18, 2008
Source: Center for Responsible Lending
Author: Parrish, Leslie; Smith, Peter

Categories: Overdraft Loans